Investor optimism regarding the direction of US stock prices over the next six months has fallen sharply, according to the American Association of Individual Investors (AAII). The latest weekly survey, released on Thursday (Friday AEDT), revealed that bullish sentiment plunged 12.2 percentage points to 33.7 per cent, dropping below its historical average of 37.5 per cent for the first time in five weeks. This indicates a significant shift in investor outlook. The AAII is an independent, non-profit organisation that provides investment education. Through publications, online resources, and local chapter meetings, the AAII helps individuals become informed and effective investors.
Corresponding with the decrease in optimism, bearish sentiment, which reflects expectations that stock prices will decline over the next six months, surged. The survey showed an increase of 10.4 percentage points, bringing bearish sentiment to 46.1 per cent. This level of pessimism is notably high, exceeding its historical average of 31.0 per cent for the 46th time in the past 48 weeks, highlighting sustained concerns among individual investors.
The bull-bear spread, calculated by subtracting bearish sentiment from bullish sentiment, experienced a substantial decrease of 22.6 percentage points, landing at –12.4 per cent. This spread is considered unusually low, remaining below its historical average of 6.5 per cent for the 34th time in 37 weeks. The AAII also asked its members for their opinion of current stock valuations.
According to the survey, a significant 54.6 per cent of respondents believe that stocks are currently overvalued. This indicates a widespread concern about the sustainability of current market prices, which may contribute to the overall decrease in bullish sentiment and the corresponding rise in bearish outlooks.
