Pessimism among retail investors increases, AAII survey shows

Investing.com — Pessimism among retail investors is on the rise, according to the latest American Association of Individual Investors (AAII) Sentiment Survey.

The firm’s survey, which measures individual investors’ expectations for stock prices over the next six months, revealed a shift in sentiment.

Bearish sentiment, which reflects expectations that stock prices will decline, increased by 3.3 percentage points to 27.0%.

However, the AAII says that despite this rise, bearish sentiment remains below its historical average of 31.0% for the third consecutive week.

The increase in pessimism comes as both bullish and neutral sentiments have declined.

Bullish sentiment, representing the expectation that stock prices will rise over the next six months, dipped slightly by 0.5 percentage points to 51.2%.

Despite the decrease, bullish sentiment is said to still be significantly above its historical average of 37.5%. “Bullish sentiment is unusually high for the second consecutive week,” says the AAII.

This marks the 42nd time in the past 43 weeks that bullish sentiment has exceeded its long-term average.

Neutral sentiment, indicating expectations that stock prices will remain essentially unchanged, saw a more substantial decline, dropping by 2.9 percentage points to 21.9%. This level is below the historical average of 31.5% for the eighth week in a row.

The bull-bear spread, which is the difference between bullish and bearish sentiment, narrowed by 3.8 percentage points to 24.2%.

However, the AAII reveals it remains well above its historical average of 6.5%, marking the 16th time in 17 weeks that the spread has been higher than usual.

The survey also touched on investor opinions regarding gold prices, with a majority expressing skepticism about their sustainability over the next year. 29.7% of the survey respondents believe gold prices will decrease moderately. Meanwhile, 27.0% believe gold prices will increase further.