AAII Sentiment Survey: Bullish and Bearish Sentiment Reach Levels Not Seen Since 2020

(AAII - Platinum) - The results from the latest AAII Sentiment Survey show bullish sentiment falling to an 18-month low. At the same time, bearish sentiment jumped to a 16-month high.

Bullish sentiment, expectations that stock prices will rise over the next six months, decreased 3.9 percentage points to 21.0%. Optimism was last lower on July 29, 2020 (20.2%). This is the ninth consecutive week that bullish sentiment is below its historical average of 38.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, decreased by 4.5 percentage points to 32.3%. This is the seventh 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, increased by 8.4 percentage points to 46.7%, staying above the historical average of 30.5% for the ninth consecutive week. This is the highest level of pessimism since September 9, 2020 (48.5%).

The bull-bear spread (bullish sentiment minus bearish sentiment) is at –25.8. This is the most negative the spread has been since July 29, 2020 (–28.2).

At current levels, bullish sentiment is unusually low and bearish sentiment is unusually high. Since July 1987, when the level of bullishness in the Sentiment Survey was more than one standard deviation below its historical average (currently readings below 28.0%), the S&P 500 index has realized six-month average and median gains of 8.2% and 8.0%, respectively.

In this week’s special question, we asked AAII members which factors are most influencing their six-month outlook for stocks. Many respondents list multiple factors.

Inflation topped the list as a key factor, with 29% of respondents mentioning it. About 20% cite interest rate hikes as another factor vital to their outlook. Additionally, 15% of respondents list both the coronavirus, including the omicron variant, and/or political challenges as considerations. About 9% of respondents cite economic concerns such as employment levels and the labor participation rate, while 7% of respondents say they will be paying attention to company earnings in 2022. Monetary policy and the Federal Reserve were named by 7% of respondents. Roughly 4% of respondents mention supply chain issues.

Here is a sampling of the responses:

  • “The market is factoring in interest rate increases. Inflation is expected to stabilize and remain high, and we will learn to live with omicron.”
  • “Bull markets do not usually end until well after the Fed begins hiking interest rates.”
  • “Our strong economy, and the fact that we are hopefully nearing the end of the coronavirus pandemic.”
  • “Although strong jobs demand will create inflation, it will also provide a base for strong consumer demand. I expect inflation to be elevated due to labor and housing but to get a respite from goods inflation as supply chain pressures ease.”

This week’s Sentiment Survey results:
Bullish: 21.0%, down 3.9 points
Neutral: 32.3%, down 4.5 points
Bearish: 46.7%, up 8.4 points

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

By AAII Staff
January 20, 2022


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