AAII Sentiment Survey: Highest Optimism And Lowest Pessimism Since January

The results from the latest AAII Sentiment Survey show both bullish and neutral sentiment rising. In addition, the number of investors describing their outlook for stocks as “bearish” decreased.

Bullish sentiment, expectations that stock prices will rise over the next six months, sharply rose by 10.3 percentage points to 32.8%. Optimism was last at this level on January 6, 2022. Even with the big jump, bullish sentiment remains below its historical average of 38.0% for the 18th consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased by 4.0 percentage points to 31.7%. This is the first time in five weeks that neutral sentiment is above its historical average of 31.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, plunged 14.3 percentage points to 35.4%. Pessimism was last lower on January 6, 2022 (33.3%). This is bearish sentiment’s 18th consecutive week above the historical average of 30.5%.

Bullish sentiment, bearish sentiment and the bull-bear spread (bullish minus bearish sentiment) are all now back within their typical historical ranges.

The ongoing invasion of Ukraine by Russia, stock market volatility, inflation, interest rates, the coronavirus pandemic and politics are all influencing individual investors’ outlook for stocks. Other factors include the economy and corporate earnings.

In this week’s special question, we asked AAII members to share their thoughts on the Federal Reserve’s first interest rate increase since 2018, and how that informed their outlook for stocks.

Almost one-third of respondents (32%) say that they have a neutral outlook regarding stocks. Many anticipate or expect the Fed to increase interest rates. A bearish outlook was cited by 21% of respondents. These respondents think the economy may be heading for a recession and that the recent interest rate increase will not be enough to get inflation under control. In contrast, approximately 20% of respondents are bullish about stocks, with many saying that the rate hike indicates the economy is in a strong place. Finally, around 20% of respondents cite a mixed outlook. Respondents in this category see both the positives and negatives relating to the interest rate increases.

Here is a sampling of the responses:

• “It does not influence my outlook, since it has been anticipated for a few months and is just the first step in a lengthy process.”
• “Until the Fed gets serious about stopping inflation, the economy and the market will suffer.”
• “Seems like not enough to tackle the inflation but may turn out to be okay after six or seven hikes, especially if oil prices come down and the pandemic turns into an endemic.”
• “Positive, probably too little too late but it didn’t spook the market, so I have to say it was about right.”

This week’s AAII Sentiment Survey results:

• Bullish: 32.8%, up 10.3 percentage points
• Neutral: 31.7%, up 4.0 percentage points
• Bearish: 35.4%, down 14.3 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.