AAII Sentiment Survey: Optimism Falls as Pessimism Rises

The results from the latest AAII Sentiment Survey show optimism about the short-term direction of the stock market falling to its lowest level for the month of August. At the same time, pessimism rose back to an unusually high level.

- Expectations that stock prices will rise over the next six months, fell 5.6 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 40th consecutive week.

- Expectations that stock prices will stay essentially unchanged over the next six months, increased 0.4 percentage points to 29.9%.

- Neutral sentiment is below its historical average of 31.5% for the 16th time in 18 weeks.

- Expectations that stock prices will fall over the next six months, rose 5.2 percentage points to 42.4%.

- It is above its historical average of 30.5% for the 39th time out of the past 40 weeks and is at an unusually high level for the 24th time out of the last 32 weeks.

- The breakpoint between typical and unusually high readings is currently 40.5%.

The bull-bear spread (bullish minus bearish sentiment) is –14.7% and is unusually low for the 25th time in 31 weeks. The breakpoint between typical and unusually low readings is currently –10.9%.

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.

- 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.