AAII SENTIMENT

Yesterday it was issued again the weekly AAII investor sentiment survey. Let’s take a look at the retail investors, are more bulls or bears?

• Bullish: 39.5%, up 3.0 points
• Neutral: 38.3%, down 2.1 points
• Bearish: 22.2%, down 1.0 points

The optimism among American individual investors is above its historical average for the first time in 12 weeks. Bullish sentiment, expectations that stock prices will rise over the next six months, rose 3.0 percentage points to 39.5% since last week. That is a significant gaining and the first time optimism is above its historical average of 39.0% since March 13, 2014. In May the bullish attitude gained a lot from the 28% level.

The neutral sentiment, expectations that stock prices will stay essentially unchanged neutral sentiment remains above its historical average of 30.5% for the 22nd consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 1.0 percentage points to 22.2%.

The spread between bullish and bearish sentiment (the “bull-bear spread”) widened to 17.3 percentage points. This is the largest bull-bear spread since February 27, 2014.

In May when the pessimism was at the highest level the market made a great rally. All in all, now the investors are more optimistic about the future so we need to more pessimistic at the same time. It always concerns me if there is a consensus in one way direction because those days come the surprise and pain. So my advice is to buy the pessimism and not the optimism.

The BFM Assets Team.