AAII Sentiment Survey Results For Frame Ended 29 July 2015

AAII Sentiment Survey Results For Frame Ended 29 July 2015

The AAII Investor Sentiment Survey measures the percentage of individual investors who are Bullish, Bearish, and Neutral on the stock market for the next 6 months; individuals are polled from the ranks of the AAII membership weekly. Just 1 vote per member is accepted in each weekly voting frame.

Data represents what direction members feel the stock market will be in the next 6 months.

AAII Investor Sentiment Survey Update

This week’s results, as follows:

Bullish: 21.1%, or 11.4

Neutral: 38.2%, or – 3.7

Bearish: 40.7% on + 15.1

Change from last week:
Bullish: -11.4
Neutral: -3.7
Bearish: +15.1
Long-Term Average:
Bullish: 38.79%
Neutral: 30.93%
Bearish: 30.28%

Commentary

Pessimism rose to its highest level in nearly 2 years in the latest AAII Sentiment Survey, as optimism fell, while Neutral sentiment came in below 40% for the 1st time since April.

Bullish sentiment

Expectations that stock prices will rise over the next 6 months, plunged by 11.4 percentage points to 21.1%. The decline puts optimism at a 7 wk low. This is the 21st week running with Bullish sentiment below its historical average of 39.0%, the longest such streak since a 29-wk stretch in Y 1993. Readings below 28.5% are considered to be really low.

Neutral sentiment

Expectations that stock prices will stay essentially unchanged over the next 6 months, fell 3.7 percentage points to 38.2%. This is the 1st time Neutral sentiment has been below 40% since 2 April 2015 (32.6%), ending a record 16-wk streak. The decline is not deep enough to keep Neutral sentiment from staying above its historical average of 31.0% for a 30th straight week.

Bearish sentiment

Expectations that stock prices will fall over the next 6 months, rose 15.1 percentage points to 40.7%. Pessimism was last higher on 22 August 2013 (42.9%). The historical average is 30.0%. Readings above 40.1% are considered to be very high.

This week’s rose in Pessimism is the largest 1-week surge since a 26.3-pt rise on 11 April 2013. It puts Bearish sentiment above 40% for only the 4th time since November 2012. The rise comes as the major stock indexes fell during much of the survey frame. This is also the 4th time in 8 weeks that Bearish sentiment has been above its historical average after spending much of the previous 12 months below 30%.

The link between very high levels of Pessimism and above-average returns for the S&P 500 index is not as strong as the link between unusually low levels of Optimism and higher market returns.

For the frame of 24 June 1987, through 7 May 2015, the S&P 500 has had a median 6-month gainer of 5.6% following unusually high Bearish sentiment readings. Over the same frame, the large-cap index has a median 6-month gain of 7.1% following unusually low Bullish sentiment readings. These numbers compare to a median 6-month gainer of 5.3% for all rolling 6-month periods over the time span analyzed.

Causing many AAII members to be cautious are concerns about the possibility of a sizable decline in stock prices occurring, the pace of economic growth, the lack of wage growth, valuations, the impact of the stronger USD on earnings and geopolitical events.

Keeping some AAII members optimistic is the US Fed’s still-accommodative monetary policy, the ongoing Bull Market, sustained economic expansion and earnings growth.

This week’s special question asked AAII members how much changes in sentiment toward the stock market impact their portfolio decisions. Approximately 33% said changes in sentiment have no impact and an additional 35% said that sentiment changes have not much or very little impact.

Adherence to a long-term investment strategy was the most common reason given as to why.

Some respondents said that they focus on other indicators. Slightly more than 17% of all respondents said they consider sentiment when making portfolio decisions, with several saying that they use it as a contrarian indicator.

By Charles Rotblut, CFA AAII

Paul Ebeling, Editor

HeffX-LTN

 

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