AAII Sentiment Survey Indicates Declining Pessimism

Investing.com — The latest survey from the American Association of Individual Investors (AAII) indicates a significant decline in investor pessimism, as bearish sentiment has dropped to its lowest level since December 2023.

According to the AAII, bearish sentiment, which represents expectations of falling stock prices over the next six months, decreased by 6.7 percentage points to 20.6%. This figure is notably below the historical average of 31.0% and marks the eighth occasion in the last nine weeks that bearish sentiment has remained low.

Conversely, optimism among investors is increasing. Bullish sentiment, which reflects expectations for rising stock prices over the next six months, rose by 3.6 percentage points to 49.0%, significantly higher than the historical average of 37.5%. This marks the 48th occurrence in 49 weeks where bullish sentiment has surpassed its average.

Neutral sentiment, indicating expectations of little change in stock prices, also increased, moving up by 3.2 percentage points to 30.4%. However, this remains slightly below the historical average of 31.5% for the fourteenth consecutive week.

The disparity between bullish and bearish sentiment has widened, with the bull-bear spread increasing by 10.3 percentage points to 28.5%. This figure is well above the historical average of 6.5%, a trend that has been observed in 22 of the past 23 weeks.

The AAII noted that investors are primarily focused on economic factors and inflation, with 33.0% of survey participants identifying these elements as the most significant influences on their six-month stock outlook. Other important factors include monetary policy and interest rates (23.5%), corporate earnings (15.7%), and valuations (13.0%).

Overall, the survey results suggest an increasing sense of optimism in the market as investor sentiment shifts away from bearish expectations.