By Charles Rotblut, CFA, AAII

Bullish sentiment is below its historical average for the first time in 15 weeks, according to the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 4.3 percentage points to 38.2%. This is the lowest level of optimism recorded in the survey since December 22, 2012. It is also just the second time in the past 17 weeks that bullish sentiment has been below its historical average of 39%.

Neutral sentiment, expectations that stock prices will stay essentially flat over the next six months, rose 2.0 percentage points to 34.0%. This matches the 2012 high set on January 5. It is also the second consecutive week that neutral sentiment has been above its historical average of 31%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 2.3 percentage points to 27.8%. This is the 14th consecutive week and the 15th out of the last 16 weeks that bearish sentiment has been below its historical average of 30%.

The difference between bullish and bearish sentiment, the bull-bear spread, narrowed to 10.4 percentage points. This extends the streak of positive double-digit differentials to 14 weeks, the longest such streak since March 2004. The bull-bear spread stayed in positive double digits for 35 consecutive weeks between July 2003 and March 2004.

A combination of rising gasoline prices, worries about the European sovereign debt crisis, uncertainty about China’s economy and concerns that the market’s rally may be losing steam helped to reduce the level of optimism recorded in our survey. Notably, bearish sentiment has stayed fairly stable over the past four weeks, with readings of 27.2% (March 15), 27.8% (March 22), 25.5% (March 29), and now 27.8%. Continued signs of economic growth in the U.S. and the stock markets performance are giving many investors reasons to stay optimistic.


This week’s special question asked AAII members if there are any catalysts they are looking for over the next several months. Responses varied, though the health and direction of the U.S. economy was cited most often. Several members said they were looking for changes in employment, housing, gasoline prices or interest rates. Other potential catalysts included a worsening of the European sovereign debt problems, a slowdown inChina’s economy and first-quarter earnings for U.S. companies.

This week’s AAII Sentiment Survey results:

  • Bullish: 38.2%; down 4.3 percentage points
  • Neutral: 34.0%; up 2.0 percentage points
  • Bearish: 27.8%; up 2.3 percentage points

Historical averages:

  • Bullish: 39%
  • Neutral: 31%
  • Bearish: 30%


Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Charles Rotblut

Charles Rotblut, CFA, is a vice president of the American Association of Individual Investors. He is the editor of the AAII Journal. He authors the weekly AAII Investor Update e-newsletter and his commentary is published on both Seeking Alpha and

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  • VII

    From what I’m gettin technically and fundamentally I would expect a decent decline in the coming weeks from many sentiment indicators.

    Wether this is just the start or something more sinister..I could not say. I don’t think as Lance Roberts and othes have suggested the bears are being shouted down…This week I have only come across one bullish bigger picture article. I’ve been looking for some positive spin….but all I can’t find one today. If anything I was to invest based on what has come across my desk to’d think it was September of 2008.

    That’s not to say the data is not valid. It always is.If the charts in Europe look terrible than to say people are too bearish isn’t factual. Their position is appropriate given the facts. Has the mood short/intermediate term shifted in the market? The elliot Wave guys have just drawn some bearish charts.

    I don’t have an opinion on the market per se. But noting what appears to be an influx of bearishness.

    Anyone else have thoughts about this?

  • BJM

    I don’t understand this sentence:

    “If anything I was to invest based on what has come across my desk to’d think it was September of 2008.”

    The negativity today is like Sep 2008? The charts are like 2008? ….

  • VII

    @ BJM

    I was referring to what I was seeing from the research reports I recieve.

    You could have just said…”hey VII” no,i’m seeing something else.

    That is what this is all about. I can share what I’ve received and or I can direct you too various sites which sound as though the high is in and it’ sall down from here. Have you seen the MSCI chart? have you looked at SX5E? How about any Eurozone Retail Sales, Yields surges?

    There is little in unbiased research I’ve gotten since Monday that looks constructive..that is all I was saying. Then I I the only one?

    No I dont think it’s 2008..but in some things it sure feels like it. Europe, CCI and Asia.

  • BJM

    I think your honey badger quote the other day said it best. The market doesn’t care about ANYTHING other than sentiment in the short-run and valuations in the long-run. Whatever the headlines and/or economic data may be at the time DOES NOT MATTER – it’s coincidental since the market will use any excuse to do what it needs to do. When sentiment gets out of balance such as last fall, the market rallies hard to bring it back in line. Once it gets out of balance to the upside (not quite there yet if you look at the recent 10dma total put/call ratio for the S&P 500 – a better sentiment gauge than actual sentiment data since it measures what investors are actually doing), then it will reverse course in order to rebalance. However, this next time it rebalances, it may rebalance back to if not below fair value in order to restore the market to its long-run valuation, which ALWAYS wins out in the long run.

  • VII

    Well said BJM…I think your comment nailed it.

  • BJM

    Thanks. Though complements are best paid to the honey badger :)

  • Larry

    “it [the market] may rebalance back to, if not below, fair value in order to restore the market to its long-run valuation, which ALWAYS wins out in the long run.” Does anyone out there in TPC land willing to share their views on what the fair value of the S & P is today? In my view fair value is about SPX 1250 to 1300. What do you say?

  • BJM

    Long run median Schiller PE is ~16x and 10y median EPS is around $68 per share, so I’d say FV is around 1,088, or 1100 if we’re rounding up.