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AAII Sentiment Survey: Optimism rebounds to a six-week high

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Movers and Shakers wrote a column · Jul 14, 2022 22:41
Optimism among individual investors about the short-term direction of the stock market rebounded to a six-week high, though continues to be unusually low. The latest AAII Sentiment Survey also shows drops in neutral and bearish sentiment.
Source: AAII
Source: AAII
Sentiment
Bullish sentiment
- Expectations that stock prices will rise over the next six months, jumped 7.5 percentage points to 26.9%.
- Optimism was last higher on June 2, 2022 (32.0%).
- It is below its historical average of 38.0% for the 34th consecutive week and is at an unusually low level for the 23rd time in 27 weeks.
Neutral sentiment
- Expectations that stock prices will stay essentially unchanged over the next six months, declined 1.2 percentage points to 26.6%.
- It below its historical average of 31.5% for the 11th time in 12 weeks.
Bearish sentiment
- Expectations that stock prices will fall over the next six months, pulled back by 6.3 percentage points to 46.5%.
- Nonetheless, pessimism is above its historical average of 30.5% for the 33rd time out of the past 34 weeks and is at an unusually high level for 22 out of the last 26 weeks.
Opinion: Influencing sentiment are monetary policy, the coronavirus pandemic, politics and the ongoing invasion of Ukraine by Russia.
The bull-bear spread (bullish minus bearish sentiment) is –19.6% and is unusually low for the 24th time in 27 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.
Current AAII Sentiment Bull-Bear Spread:
Source: AAII
Source: AAII
About AAII Semtiment Survey
- 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.
Source: AAII
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