Pessimism among individual investors about the short-term outlook for stocks decreased in the latest AAII Sentiment Survey. Meanwhile, optimism and neutral sentiment increased.
Bullish sentiment, expectations that stock prices will rise over the next six months, increased 1.0 percentage points to 37.8%. Bullish sentiment is above its historical average of 37.5% for the third time in four weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased 3.4 percentage points to 20.7%. Neutral sentiment is unusually low and is below its historical average of 31.0% for the 34th consecutive week.
Bearish sentiment, expectations that stock prices will fall over the next six months, decreased 4.4 percentage points to 41.4%. Bearish sentiment is unusually high and is above its historical average of 31.5% for the 38th consecutive week.
The bull-bear spread (bullish minus bearish sentiment) increased 5.3 percentage points to –3.6%. The bull-bear spread is below its historical average of 6.5% for the 15th consecutive week.
This week’s special question asked AAII members what type of stocks they are favoring right now.
Here is how they responded:
Dividend stocks: 21.7%
Growth stocks: 18.1%
Value stocks: 12.3%
Small-cap stocks: 4.4%
A mix of the above/other: 43.5%
This week’s Sentiment Survey results:
Bullish: 37.8%, up 1.0 points
Neutral: 20.7%, up 3.4 points
Bearish: 41.4%, down 4.4 points
Historical averages:
Bullish: 37.5%
Neutral: 31.0%
Bearish: 31.5%
Bearish at 41.4% is still way above the 31.5% average, but it fell 4.4 points in one week. When pessimism is this stretched and starts rolling over, that tends to be a decent backdrop. Bulls above average for the third time in four weeks too.