By Charles Rotblut, CFA, AAII
Though aggregate pessimism increased as the Dow Jones industrial average reached new record highs, some individual investors described themselves as being more optimistic in the latest AAII Sentiment Survey.
Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded by 2.7 percentage points to 31.1%. The improvement ended a six-week drop that saw optimism decline by a cumulative 23.9 percentage points. Even with the rebound, bullish sentiment is below its historical average of 39% for the second consecutive week.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 4.6 percentage points to 30.4%. This puts neutral sentiment nearly even with its historical average of 30.5%.
Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.9 percentage points to 38.5%. During this span of three consecutive weekly increases, pessimism has risen by a cumulative 9.8 percentage points. The historical average is 30.5%.
The Dow’s new record high gave some AAII members reason to believe the current rally will continue. It also heightened concerns other AAII members have about the markets being overbought and due for a pullback in prices. In the background are mixed views about the pace of economic growth along with ongoing frustration with Washington.
This week’s special question asked AAII members how they perceived the health of the U.S. consumer. There was no consensus. The largest group (about 30% of respondents) described consumers as struggling or otherwise in poor shape. Conversely, the next largest group (about 20%) said consumers are improving. Smaller groups of respondents said the health of consumers is just fair, described consumers as being uncertain or good. Several AAII members believe some consumers are split between those who are doing well and those who are struggling.
Here is a sampling of the responses:
· “Fairly good and continuing to gradually improve.”
· “Not very strong overall, but improving as the real estate market bounces back.”
· “Just fair. Incomes have not increased that much, but consumers’ balance sheets have improved.”
· “Weak! Too much debt and too much uncertainty in our political system.”
· “I believe we are seeing a widening gap between consumers who are doing pretty well and those who are doing very poorly.”
· “Not so hot according to my wife.”
This week’s AAII Sentiment Survey:
· Bullish: 31.1%, up 2.7 percentage points
· Neutral: 30.4%, down 4.6 percentage points
· Bearish: 38.5%, up 1.9 percentage points
Historical averages:
· Bullish: 39.0%
· Neutral: 30.5%
· Bearish: 30.5%
The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online at: http://www.aaii.com/
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