Sentiment Getting Frothy



Bullish sentiment posted its largest weekly gain in nearly three years.

Expectations that stock prices will rise over the next six months, surged 14.4% to 45.4%. This spike in optimism was the largest since July 15, 2010.

Bearish sentiment — expectations that stock prices will fall over the next six months — dropped 6.5 points to 32.0%. Pessimism remains above historical average of 30.5%.

Note the sentiment swings: Just 2 weeks ago, 28.4% of AAII members described themselves as optimistic — the lowest level since November 2010.

Sampling of AAII sentiment survey responses after the jump.


This week’s special question asked AAII members how the new record highs set by the Dow Jones industrial average has influenced their opinion about the attractiveness of stocks. Responses were mixed. The largest group of respondents (approximately 30%) said the new record highs had no impact. Approximately 18% of respondents expect stock prices to pull back in the short term, though some AAII members think the pullback will be followed by a rebound to even higher prices. Roughly 17% said they are now more cautious or bearish, while 11% said they are more bullish. A couple of respondents said it is harder to find bargains in the current environment.

Here is a sampling of the responses:

“The new highs concern me a little, as we may be getting ahead of ourselves.”
“I am reluctant to put new money (except for my regular contributions) into the market right now.”
“As stocks go up in price, they are more risky in my view, but I think stocks still have more upside than downside at current levels.”
“I have to search harder to find stocks of value.”
“The record high has not influenced my opinion.”

This week’s AAII Sentiment Survey:

Bullish: 45.4%, up 14.4 percentage points
Neutral: 22.5%, down 7.9 percentage points
Bearish: 32.0%, down 6.5 percentage points

Historical averages:

Bullish: 39.0%
Neutral: 30.5%
Bearish: 30.5%

The AAII Sentiment Survey
Charles Rotblut, CFA, Vice President and AAII Journal Editor
American Association of Individual Investors

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