AAII Sentiment Survey: Pessimism rises back above 50%

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.

- Expectations that stock prices will rise over the next six months, dropped 3.4 percentage points to 19.4%.

- It 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.

- Expectations that stock prices will stay essentially unchanged over the next six months, declined 2.7 percentage points to 27.8%.

- It is below its historical average of 31.5% for the 10th time in 11 weeks.

- Expectations that stock prices will fall over the next six months, jumped 6.1 percentage points to 52.8%.

- It 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.

- Measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market short term.

- Individuals are polled from the AAII Web site on a weekly basis.