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The results from the latest AAII Sentiment Survey show bullish sentiment staying below 20% for a second consecutive week. Neutral sentiment increased, while the percentage of individual investors with pessimistic expectations decreased.
Bullish sentiment, expectations that stock prices will rise over the next six months, increased by 3.0 percentage points to 18.9%. This is the first time that optimism has been below 20% on consecutive weeks since May 18 and 25, 2016. This week’s reading is also just the 33rd time in the history of the survey that bullish sentiment has been below 20%. (The survey was started in 1987.) Optimism is below its historical average of 38.0% for the 22ndconsecutive week and is at an unusually low level (below 27.9%) for the 12th time out of the last 15 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.5 percentage points to 37.3%. This is the fifth consecutive week that neutral sentiment is above its historical average of 31.5%.
Bearish sentiment, expectations that stock prices will fall over the next six months, decreased by 4.5 percentage points to 43.9%. Pessimism is above its historical average of 30.5% for the 21st time out of the last 22 weeks. Bearish sentiment is also at an unusually high level (above 40.1%) for the 12th time out of the last 14 weeks.
Historically, the S&P 500 index has gone on to realize above-average and above-median returns during the six- and 12-month periods following unusually low readings for bullish sentiment and for the bull-bear spread. (This week’s bull-bear spread of –25.0% is also unusually low.) Unusually high bearish sentiment readings historically have also been followed by above-average and above-median six-month returns in the S&P 500.
Continued high rates of inflation, the ongoing invasion of Ukraine by Russia, rising interest rates and Washington politics are influencing individual investors’ outlook for stocks. Other factors include supply chain issues, monetary policy and corporate earnings.
In this week’s special question, we asked AAII members to share which industries or sectors they think are attractive buying opportunities in the current market environment. Many members responded with more than one sector or industry.
A little less than one out of four (22%) respondents view the commodities sector—including oil, gas and metals—as an attractive buying opportunity. In addition, 17% of all responses favor the energy sector.
Around 10% like industrials and defense sectors right now. Roughly 9% of respondents say that the financial industry has good investment potential. The technology sector was mentioned by 8% of respondents, while 7% mentioned health care. The consumer staples and utilities industries were named by 6% of respondents each. The real estate sector was listed by 5%.
Here is a sampling of the responses:
- “Consumer staples, cyclicals, minerals, possibly insurers. That’s where I’m at, lightly invested and up on the year.”
- “Energy, utilities and staples. Maybe gold. I noticed that commodities seem much more manipulated in pricing, however I do hold wheat.”
- “Utilities and health care are doing well right now. Given the international environment, one would think that defense industry stocks would be worth a look.”
- “Companies that benefit from inflation and defensive companies with solid earnings/dividends: energy, health care, consumer staples, real estate.”
- “I don’t believe any particular industry or sector is categorically more attractive than any other. There may be attractive individual securities in any industry or sector.”
This week’s AAII Sentiment Survey results:
- Bullish: 18.9%, up 3.0 percentage points
- Neutral: 37.3%, up 1.5 percentage points
- Bearish: 43.9%, down 4.5 percentage points
Historical averages:
- Bullish: 38.0%
- Neutral: 31.5%
- Bearish: 30.5%
The AAII Sentiment Survey has been conducted weekly since July 1987. The survey and its results are available online.
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