AAII Sentiment Survey Results For Frame Ended 9 July 2015

Neutral sentiment remained above 40% for a 14th week running in the latest AAII Sentiment Survey. Optimism rebounded as pessimism pulled back from last week’s Y 2015 high.

Bullish sentiment

Expectations that stock prices will rise over the next 6 months, rose 5.3 percentage points to 27.9%, a 3 wk low. The large drop keeps optimism at an unusually low level for the 9th week in 10. This is also the 18th straight week with a Bullish sentiment reading below its historical average of 39.0%.

Neutral sentiment

Expectations that stock prices will stay essentially unchanged over the next 6 months, was up 0.6 percentage points to 42.9%. The increase has Neutral sentiment above its historical average of 31.0% for the 27th straight week and at an unusually high level for a 14th week running

Bearish sentiment

Expectations that stock prices will fall over the next 6 months, pulled back by 5.9 percentage points to 29.2%. The historical average is 30.0%.

The current 14-wk streak of Neutral sentiment readings at or above 40% is the 1st such streak since 8 July through 21 October 1988. If Neutral sentiment is at or above 40% next week it would tie the record set between 13 November 1987 and 4 March 1988.

Optimism is on a streak. The current stretch of 18 straight weeks with below-average readings is the longest since a 20-week stretch between 5 April and 16 August 2012.

Notable upward and downward moves in Bullish and Bearish sentiment have been occurring over the past few weeks as the S&P 500 is becoming more volatile. The timing and magnitude of a change in US monetary policy is still the focus.

Contributing to Bearish sentiment are concerns about the possibility of a bigger decline in stock prices happening, the pace of economic growth, the lack of wage growth, lofty stock valuations, the impact of the stronger Buck on earnings and geopolitical events.

Contributing to Bullish sentiment are the ongoing Bull market, sustained economic expansion and earnings growth.

This week’s special question asked AAII members what they thought about the limited volatility experienced by the large-cap US indexes during Q-2.

Responses were mixed.

The largest group of responses (14%) believe the decline in volatility is a precursor to a Southside move in stocks. A nearly equal number (14%) pointed to a lack of catalysts to move stock prices in either direction. About 9% said the lack of volatility is not influencing how they view stocks. The uncertainty of when the Fed will begin to raise rates was cited by 7% of respondents. Slightly more than 6% said the low volatility will not last, though they are unsure in what direction stock prices will move. An additional 6% viewed the lack of volatility as a positive sign, 5%  perceive the market or the individual stocks they own as having been volatile