AAII Sentiment Survey 21st August 2020

 

AAII Sentiment Survey:

Bearish sentiment stayed above 40% for the 22nd time out of the past 24 weeks. Plus, this week’s special question asked AAII members what impact the impasse over a new coronavirus relief bill is having on their outlook for stocks.

August 20, 2020

Pessimism among individual investors about the short-term direction of the stock market extended its streak of staying above 40%. The latest AAII Sentiment Survey also shows modestly higher levels of bullish sentiment and a small decline in neutral sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 0.4 percentage points to 30.4%. Though at a five-week high, optimism remains below its historical average of 38.0% for the 24th consecutive week and the 29th week this year.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 0.6 percentage points to 27.2%. This is the 30th time out of 32 weeks that neutral sentiment is below its historical average of 31.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 0.3 percentage points to 42.4%. Pessimism is above its historical average of 30.5% for the 26th consecutive week and the 28th time this year.

Pessimism is above 40% for the 22nd time out of the past 24 weeks. Bearish sentiment readings above 40.2% are unusually high (more than one standard deviation above average). Both bullish and neutral sentiment are within their typical historical ranges.

The ongoing high level of pessimism reflects concerns about the coronavirus pandemic and the economy. However, some AAII members have been encouraged by the rebound in the stock market from its March lows. Other factors influencing AAII members’ sentiment include the economy, corporate earnings, valuations, the November elections and interest rates.

This week’s special question asked AAII members what impact the impasse over a new coronavirus relief bill is having on their outlook for stocks. One out of three respondents (33%) say that the impasse over a new coronavirus relief bill is having little to no impact on their outlook for stocks. This compares to 22% of respondents who say that the impasse is having a negative impact on their outlook for stocks. An additional 14% of respondents say that they are more concerned about the impact of the upcoming election on the market.

Other factors listed as affecting individual investors’ outlook include market volatility (named by 13% of respondents), the long-term impact of debt (named by 8% of respondents) and the possibility of another market correction (named by 7% of respondents).

Here is a sampling of the responses:

• “The continued impasse and possible lack of agreement before the election will cause me to significantly reduce my holdings. I expect (as has often been historically the case) a substantial sell-off in October.
• “I don’t believe that the impasse has any effect on the market. Investors should be aware by now that the government is dysfunctional.”
• “Little impact. Of more concern to me is there being a coherent federal leadership in addressing the pandemic, the disconnect between the haves and have less and addressing economic and ‘people’ effects of the pandemic.”
• “In the short term, I expect major indexes to react negatively. Once additional stimulus is in place and there is further definition on dealing with the coronavirus, upward movement will reoccur into next spring, regardless of which party wins in November.”