AAII Sentiment Survey: Neutral Sentiment Above Average For 10th Consecutive Week

Neutral sentiment rose, extending its streak of above-average readings to 10 consecutive weeks in the latest AAII Sentiment Survey. Bearish sentiment fell but remained unusually high, while bullish sentiment rose but remained unusually low. In addition, the majority of surveyed AAII members said fourth-quarter earnings approximately matched their expectations.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 1.4 percentage points to 24.8%. Optimism is at an unusually low level for the third consecutive week and the 43rd time out of the past 62 weeks. Bullish sentiment is also below its historical average of 37.5% for the 66th time out of the past 68 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased by 1.6 percentage points to 33.4%. At 10 consecutive weeks, this is the longest stretch of above-average readings since a 22-week stretch between August 2019 and January 2020. The historical average for neutral sentiment is 31.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, decreased 3.1 percentage points to 41.7%. Pessimism is at an unusually high level for the second consecutive week and the 41st time out of the past 62 weeks. Bearish sentiment is also above its historical average of 31.0% for the 63rd time out of the past 68 weeks.

The bull-bear spread (bullish minus bearish sentiment) increased by 4.5 percentage points to –16.9% but remains unusually low for the third consecutive week. The bull-bear spread is at an unusually low level for the 45th time out of the past 62 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 the bull-bear spread. Similarly, the market benchmark has gone on to realize above-average and above-median returns during the six- and 12-month periods following unusually high readings for bearish sentiment.

Monetary policy, interest rates, inflation and the pace of economic growth are all influencing individual investors’ short-term outlook for stocks.

This week’s special question asked AAII members how they perceived fourth-quarter earnings. Here are their responses:

• Earnings were better than I expected: 29.9%
• Earnings approximately matched my expectations: 58.7%
• Earnings were worse than I expected: 8.7%

This week’s AAII Sentiment Survey results:

• Bullish: 24.8%, up 1.4 percentage points
• Neutral: 33.4%, up 1.6 percentage points
• Bearish: 41.7%, down 3.1 percentage points

Historical averages:

• Bullish: 37.5%
• Neutral: 31.5%
• Bearish: 31.0%

The AAII Sentiment Survey has been conducted weekly since July 1987.