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The percentage of individual investors expecting stocks to decline further is above 50% for the seventh time in 11 weeks. The latest AAII Sentiment Survey also shows both optimism and neutral sentiment falling.
Bullish sentiment, expectations that stock prices will rise over the next six months, dropped 3.4 percentage points to 19.4%. Bullish sentiment is below its historical average of 38.0% for the 33rd consecutive week and is at an unusually low level for the 22nd time in 26 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 2.7 percentage points to 27.8%. Neutral sentiment is below its historical average of 31.5% for the 10th time in 11 weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, jumped 6.1 percentage points to 52.8%. Bearish sentiment is above its historical average of 30.5% for the 32nd time out of the past 33 weeks and is at an unusually high level for 21 out of the last 25 weeks.
The bull-bear spread (bullish minus bearish sentiment) is -33.4% and is unusually low for the 23rd time in 26 weeks.
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 for the bull-bear spread. Unusually high bearish sentiment readings historically have also been followed by above-average and above-median six-month returns in the S&P 500. The S&P 500 has underperformed following periods of below-average neutral sentiment, though the link is weaker.
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: 19.4%, down 3.4 percentage points
- Neutral: 27.8%, down 2.7 percentage points
- Bearish: 52.8%, up 6.1 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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