AAII Sentiment Survey Results For Frame Ended 2 September 2015

Commentary

The level of pessimism among individual participants has pulled back, but it is still above average, according to the latest AAII Sentiment Survey. Neutral sentiment rebounded, while optimism was a bit lower.

Bullish Sentiment

Expectations that stock prices will rise over the next 6 months, was flat to unchanged, decreasing by just 0.1 percentage points to 32.4%. The modest decline keeps optimism below its historical average of 39.0% for the 26th week running, the longest run since a 29-wk run in Y 1993.

Neutral Sentiment

Expectations that stock prices will stay essentially unchanged over the next 6 months, rebounded by 6.7 percentage points to 35.9%. The increase puts Neutral sentiment back above its historical average of 31.0%.

Bearish Sentiment

Expectations that stock prices will fall over the next 6 months, retreated by 6.6 percentage points to 31.7%. Though at a 6-wk low, pessimism remains above its historical average of 30.0% for a 6th straight week. This is the longest run of consecutive above-average readings for Bearish sentiment since a 16-wk run between 30 August and 13 December 2012.

Reaction by individual participants to the volatility experienced by the stock market over the past 2 weeks is mixed, as this week’s sentiment readings and the responses to this week’s special question indicate.

The fact that the major US market indexes have not retested their recent lows likely helped alleviate some of the pessimism registered in last week’s survey results.

This week’s special question asked AAII members for their thoughts about the market’s recent volatility.

Responses fell into 1 of 4 groups.

Nearly 15% have a positive view, with several describing the recent dive in stock prices as a buying opportunity. About 21% view the Southside move negatively, saying either more Southside actionor more volatility is coming. About 19% say they had expected a Southward move or are otherwise not surprised to see volatility increase. Slightly more than 12% say the recent swings in prices are not impacting their investment decisions. A small number of respondents blamed trading programs or panicking on the part of some participants for the increased volatility and Southside movement of stock prices.