AAII Sentiment Survey Results For Frame Ended 16 December 2015

AAII Sentiment Survey Results For Frame Ended 16 December 2015

$DIA, $SPY, $QQQ

The AAII Investor Sentiment Survey measures the percentage of individual investors who are Bullish, Bearish, and Neutral on the stock market for the next 6 months; individuals are polled from the ranks of the AAII membership weekly. Just 1 vote per member is accepted in each weekly sentiment voting frame.

Data represents what direction members feel the stock market will be in the next 6 months.

Survey Results for Frame Ending 16 December 2015

This week’s Sentiment Survey results:

Bullish: 23.9%, -4.6

Neutral: 36.8%, –4.9

Bearish: 39.4%, + 9.5

Change from last week

Bullish: -4.6

Neutral: -4.9

Bearish: +9.5
Long-Term Average:

Bullish: 38.71%

Neutral: 31.03%

Bearish: 30.27%

Commentary

The percentage of individual investors expressing pessimism about the short-term direction of stock prices rose to nearly a 3-month high in the latest AAII Sentiment Survey. Optimism, conversely, fell to a 5-month low. Neutral sentiment also fell.

Bullish sentiment

Expectations that stock prices will rise over the next 6 months, fell 4.6 percentage points to 23.9%. Optimism was last lower on 29 July 2015 (21.1%). This is the 39th out of the past 41 weeks with a Bullish sentiment reading below its historical average of 39.0%.

Neutral sentiment

Expectations that stock prices will stay essentially unchanged over the next 6 months, fell 4.9 percentage points to 36.8%. This is a 2-month low. Even with the fall, Neutral sentiment is above its historical average of 31.0% for the 14th week running, and the 48th week this year.

Bearish sentiment

Expectations that stock prices will fall over the next 6 months, spiked upwards by 9.5 percentage points to 39.4%. Pessimism was last higher on 30 September 2015 (39.9%). This is just the 3rd time in 14 weeks that pessimism is above its historical average of 30.0%.

During the past 2 weeks, Bearish sentiment has risen by a cumulative 18.2 percentage points, while Neutral sentiment has fallen by a cumulative 12.6 percentage points.

Bullish sentiment has also fallen, dropping by a cumulative 5.6 percentage points. Optimism is at an unusually low level, while pessimism is near the upper end of its typical range.

There is not a one reason to explain the shift in sentiment.

The major stock indexes, though ending the 7-day survey period essentially flat, are down MTD.

Stock prices have experienced volatility, the S&P 500 has incurred intra-day swings of 1.5% on 6 days this month. In addition to fretting about further declines in stock prices, some AAII members are concerned about corporate earnings, the pace of US economic growth and geopolitics, as well as being frustrated with US politics.

Keeping some AAII members optimistic is the possibility of future price gains, the ability of the S&P 500 to continue trading near its record high, seasonal trends and better-than-forecast 3rd-Quarter earnings.

Most of this week’s survey responses were given before Wednesday’s rate hike announcement by the FOMC.

This week’s special question asked AAII members how they thought the average consumer was faring relative to a year ago.

Nearly 39% said the average consumer is faring better, though many clarified their responses by describing the average consumer as doing somewhat or a little bit better.

Lower energy prices and, to a lesser extent, a better job market and wage growth were credited.

Approximately 17% said the average consumer is faring about the same. Though energy prices are low, several of these respondents view prices on other goods and services as rising.

Slightly more than 21% described the average consumer as faring worse.

These respondents said higher prices and expenses, particularly for healthcare, and slow-to-stagnant wage growth were offsetting the benefit of lower energy costs.

By Charles Rotblut, CFA, AAII Journal

Paul Ebeling, Editor

West Brook Radio

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