AAII Sentiment Survey: Bearish Sentiment Reaches Eight-Year High, Bullish Sentiment Remains Low

(AAii - American Association of Individual Investors) - In the results from the latest AAII Sentiment Survey, bearish sentiment rose to its highest level since 2013. In addition, the number of investors describing their outlook for stocks as “neutral” decreased.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 2.2 percentage points to 23.1%, well below the historical average of 38.0% and also more than one standard deviation below its historical average (below 28.0%). Bullish sentiment levels have now been below the historical average for 10 consecutive weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, decreased by 8.4 percentage points to 23.9%. Neutral sentiment was last lower on September 2, 2021 (23.2%).

Bearish sentiment, expectations that stock prices will fall over the next six months, increased by 6.2 percentage points to 52.9%, staying above the historical average of 30.5% for the 10th consecutive week. It has also well surpassed one standard deviation above the historical average (above 40.1%). Additionally, this is the 41st highest reading of bearish sentiment in the survey’s history. This particular reading is the highest since April 11, 2013 (54.5%), and the spread between bullish and bearish is at its lowest point since 2013 (–29.8%).

The return to normalcy from the coronavirus pandemic, monetary and fiscal stimulus and inflationary pressures are influencing individual investors’ outlook for stocks. Other factors include earnings, valuations and the Biden administration’s initiatives.

In this week’s special question, we asked AAII members to share their thoughts about the Nasdaq composite’s drop over the past several weeks.

We received over 80 responses. Twenty-seven percent of respondents say that they view the correction in a neutral perspective and expected one to occur. About 24% of respondents have a bearish outlook on the correction. Conversely, 21% of respondents view the correction as a buying opportunity and see the Nasdaq’s drop in a bullish sense. Additionally, 13% of respondents attribute the correction to macroeconomic factors like Federal Reserve policy, rising interest rates and inflation. Roughly 6% of respondents mention that the correction was overdone and wasn’t as drastic as many thought.

Here is a sampling of the responses:

  • “Not surprising considering the high values of stocks like Amazon.”
  • “This is the BIG one. Several rate hikes and increased taxes, we are doomed.”
  • “Necessary correction, as in all corrections, overdone on some stocks. Opportunities.”
  • “Instead of addressing the inflation previously in a gradual manner, the Fed has backed themselves (and us) into having to more aggressively address it now. And this will slow down the stock market in 2022.”
  • “I think the drop is overdone and has given investors a good point to buy many Nasdaq stocks.”

This week’s Sentiment Survey results:
Bullish: 23.1%, up 2.2 points
Neutral: 23.9%, down 8.4 points
Bearish: 52.9%, up 6.2 points

Historical averages:
Bullish: 38.0%
Neutral: 31.5%
Bearish: 30.5%

By AAII Staff
January 27, 2022


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