IWM - AAII Sentiment Survey: Highest Pessimism Since Mid-May

2023-09-28 22:23:09 ET

Summary

• Bullish sentiment fell 3.5 percentage points to 27.8%.
• Neutral sentiment declined by 2.8 percentage points to 31.3%.
• Bearish sentiment rose 6.3 percentage points to 40.9%.

Pessimism among individual investors about the short-term outlook for stocks rose to its highest level since mid-May in the latest AAII Sentiment Survey. Meanwhile, optimism fell to a four-month low.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 3.5 percentage points to 27.8%. Optimism was last lower on May 25, 2023 (27.4%). Bullish sentiment has fallen by a cumulative 14.4 percentage points over the past three weeks. Optimism is below its historical average of 37.5% for the sixth time in seven weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined by 2.8 percentage points to 31.3%. Neutral sentiment is above its historical average of 31.5% for the sixth time in seven weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 6.3 percentage points to 40.9%. Pessimism was last higher on May 11, 2023 (41.2%). This is the fourth time in six weeks that bearish sentiment is above its historical average of 31.0%.

The bull-bear spread (bullish minus bearish sentiment) plunged 9.8 percentage points to –13.2%. The bull-bear spread was last lower on May 18, 2023 (–16.8%).

Bearish sentiment is now back at an unusually high level (more than one standard deviation above its historical average). Bullish sentiment is near the bottom of its typical range. Historically, the S&P 500 index has gone on to realize above-average and above-median returns during the six- and 12-month periods following unusually high readings for bearish sentiment.

This week’s special question asked AAII members what they thought about the Federal Reserve’s decision to keep interest rates unchanged. Here are their responses:

• It was the right decision: 66.3%
• They should have raised rates: 18.6%
• They should have cut rates: 6.3%
• Not sure/no opinion: 8.6%

This week’s Sentiment Survey results:

• Bullish: 27.8%, down 3.5 percentage points
• Neutral: 31.3%, down 2.8 percentage points
• Bearish: 40.9%, up 6.3 percentage points

Historical averages:

• Bullish: 37.5%
• Neutral: 31.5%
• Bearish: 31.0%

The AAII Sentiment Survey has been conducted weekly since July 1987. The survey and its results are available online .

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