AAII Sentiment Survey Results For Frame Ended 7 September 2015

Commentary

Optimism rose to its highest level since June in the latest AAII Sentiment Survey. Pessimism is also higher, Neutral sentiment is down.

Bullish Sentiment

Expectations that stock prices will rise over the next 6 months, rose 2.3 percentage points to 34.6%. This is the largest amount of optimism registered by this survey since 25 June 2015, (35.6%) and is the 3rd-highest reading since March. Even with the rebound, bullish sentiment remains below its historical average of 39.0% for the 27th week running, the longest such streak since a 29-week stretch in Y 1993.

Neutral Sentiment

Expectations that stock prices will stay essentially unchanged over the next 6 months, fell 5.6 percentage points to 30.3%. The drop reverses last week’s rebound and puts Neutral sentiment below its historical average of 31.0% for the 2nd time in 3 weeks.

Bearish Sentiment

Expectations that stock prices will fall over the next 6 months, rebounded by 3.3 percentage points to 35.0%. The rise keeps pessimism above its historical average of 30.0% for a 7th straight week. This is the longest streak of consecutive above-average readings for bearish sentiment since a 16-week stretch between 30 August and 13 December 2012.

Since volatility returned to the stock market, a larger proportion of individual investors are optimistic about the 6-month prospects for equities.

Bullish sentiment is above 30% for a 3rd consecutive week for the 1st time since last April. This improvement from low levels reflects the perception among some individual investors that valuations have improved and that the recent volatility is providing a buying opportunity.

Bullish sentiment remains below average in here. At the same time, pessimism continues to be above average. The slightly higher level of pessimism in this week’s survey reflects concerns among many individual investors about the possibility of stock prices falling further due to valuations, slow earnings growth and slow economic growth among other factors.

This week’s special question asked AAII members how comfortable they are with the current valuations of stocks. About 30% said they are either uncomfortable or have very little comfort with prevailing valuations. Many of these members said that stocks are still pricey even after the recent pullback. Others pointed to the slow pace of economic and earnings growth. Slightly more than 25% described themselves as being comfortable with current valuations. Many of these members said that the market’s recent volatility has lowered stock prices, making valuations more attractive. About 10% of respondents described stocks as being fairly valued or said that their opinion depends on the stock or sector being looked at. Smaller groups of respondents said that although prices have recently declined, valuations are still high, or that they anticipate further declines in stock prices to occur.