AAII Sentiment Survey Results For Frame Ended 3 February 2016

AAII Sentiment Survey Results For Frame Ended 3 February 2016

$DIA, $SPY, $QQQ, $VXX

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 sentiment voting frame

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

Bullish: 32.0%, +0.8

Neutral: 38.7%. +1.3

Bearish: 29.2%, -2.2

Change from last week:

Bullish: +0.8
Neutral: +1.3
Bearish: -2.2

Long-Term Average:

Bullish: 38.61%
Neutral: 31.07%
Bearish: 30.32%

Commentary

The percentage of individual investors describing their short-term outlook for stock prices as Neutral is now at a 2-month high, according to the latest AAII Sentiment Survey.

Pessimism continues to pull back from its recent highs.

Bullish sentiment

Expectations that stock prices will rise over the next 6 months, edged up 0.8 percentage points to 32.0%. The increase keeps optimism at its highest mark since 26 November 2015 (32.4%). It is not a large enough move to prevent optimism from staying below its historical average of 39.0% for the 17th week running and the 50th out of the past 52 weeks.

Neutral sentiment

Expectations that stock prices will stay essentially unchanged over the next 6 months, rose 1.3 percentage points to 38.7%. Neutral sentiment was last higher on 7 January 2016 (39.6%). With the increase, Neutral sentiment is above its historical average of 31.0% for a 5th consecutive week and the 57th time in the past 61 weeks.

Bearish sentiment

Expectations that stock prices will fall over the next 6 months, declined 2.2 percentage points to 29.2%. Pessimism was last lower on 30 December 2015 (23.6%). This week’s decrease puts pPessimism below its historical average of 30.0% for the 1st time in 9 weeks and just the 2nd time in the past 12 weeks.

Bearish sentiment has now fallen by a cumulative 19.5 percentage points over the past 3 weeks. The large drop follows what was nearly a 3-year high of 48.7% on 10 February 2015. The decline in pessimism corresponds with what is turning out to be at least a short-term bottom for the major US stock indexes.

Notably, though Optimism has improved in recent weeks, less than a third of all survey respondents describe their short-term outlook of stocks as Bullish.

Many individual investors are still concerned about the pace of economic growth in the US, the pace of economic growth in China, tensions in the Middle East, the rate of earnings growth and prevailing valuations.

Frustration with Washington politics continues to be expressed in the answers to our weekly special questions.

This week’s special question asked AAII members how Q-4 earnings have influenced their outlook for stock prices.

33% respondents said Q-4 earnings did not influence or have only had a minor influence on their outlook for stocks.

Many of these respondents said they are more focused on other factors, while some said they take a long-term view.

23% of respondents said Q-4 results caused them to be more Pessimistic or at least more cautious because of declines in profitability and/or current stock valuations.

8% described themselves as being more Optimistic as a result of Q-4 earnings.

By Charles Rotblut, CFA, AAII Journal

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