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The results from the latest AAII Sentiment Survey show neutral sentiment rising back above its historical average. In addition, the number of investors describing their outlook for stocks as “bearish” fell to an eight-week low.
Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.9 percentage points to 27.7%. The pullback puts optimism right at the breakpoint between typical and unusually low readings. Bullish sentiment remains below its historical average of 38.0% for the 36th consecutive week.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 4.0 percentage points to 32.2%. This is the first time in seven weeks that neutral sentiment is above its historical average of 31.5%. Neutral sentiment was last higher on April 21, 2022 (37.3%).
Bearish sentiment, expectations that stock prices will fall over the next six months, declined 2.1 percentage points to 40.1%. The decrease puts pessimism back within its typical range of readings for the first time since June 2, 2022. (The breakpoint between typical and unusually high readings is currently 40.5%.) Nevertheless, bearish sentiment is above its historical average of 30.5% for the 35th time out of the past 36 weeks.
The bull-bear spread (bullish minus bearish sentiment) is –12.4% and is unusually low for the 24th time in 27 weeks. The breakpoint between typical and unusually low readings is currently –10.8%.
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 the bull-bear spread.
Continued volatility in the major stock indexes along with inflation, corporate earnings and increased chatter about the possibility of a recession are all likely weighing on individual investors’ short-term expectations for the stock market. Also influencing sentiment are monetary policy, the coronavirus pandemic, politics and the ongoing invasion of Ukraine by Russia.
This week’s AAII Sentiment Survey results:
- Bullish: 27.7%, down 1.9 percentage points
- Neutral: 32.2%, up 4.0 percentage points
- Bearish: 40.1%, down 2.1 percentage points
Historical averages:
- Bullish: 38.0%
- Neutral: 31.5%
- Bearish: 30.5%
The AAII Sentiment Survey has been conducted weekly since July 1987. The survey and its results are available online.
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