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Pessimism among individual investors about the short-term direction of the stock market fell to its lowest level in 10 weeks according to the latest AAII Sentiment Survey. Neutral sentiment also pulled back, while optimism rebounded.
Bullish sentiment, expectations that stock prices will rise over the next six months, rose 3.5 percentage points to 24.0%. Optimism remains below its historical average of 37.5% for the 54th consecutive week and is at an unusually low level for the seventh consecutive week.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 1.5 percentage points to 36.0%. Neutral sentiment is above its historical average of 31.5% for the second consecutive week.
Bearish sentiment, expectations that stock prices will fall over the next six months, fell 2.1 percentage points to 39.9%. This is just the second time bearish sentiment has been below 40% since September 2022. Pessimism was last lower on November 3, 2022 (32.9%). Bearish sentiment is above its historical average of 31.0% for the 57th time out of the past 60 weeks.
The bull-bear spread (bullish minus bearish sentiment) is –15.9%. This is well below the historical average of 6.6%. The bull-bear spread remains unusually low for the seventh consecutive week.
Historically, the S&P 500 index has gone on to realize above-average and above-median returns during the six- and 12-month periods following unusually low readings for bullish sentiment and the bull-bear spread. The magnitude of outperformance has diminished because of the ongoing bull market. As we’ll discuss in this week’s AAII Investor Update (available online this afternoon), the average six-month return for the S&P 500 following an unusually low bullish sentiment reading in the AAII Sentiment Survey is now 6.6%. The median return for the index is 6.7%. (At the end of 2021, the average and median six-month returns for the S&P 500 following unusually low bullish sentiment readings were 8.2% and 8.0%.)
Concerns about the economy, inflation, corporate earnings and volatility in the stock market continue to cause many individual investors to maintain a cautious short-term outlook.
This week’s AAII Sentiment Survey results:
- Bullish: 24.0%, up 3.5 percentage points
- Neutral: 36.0%, down 1.5 percentage points
- Bearish: 39.9%, down 2.1 percentage points
Historical averages:
- Bullish: 37.5%
- Neutral: 31.5%
- Bearish: 31.0%
The AAII Sentiment Survey has been conducted weekly since July 1987. The survey and its results are available online.
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