Neutral Sentiment Among Retail Investors Rises

According to the latest American Association of Individual Investors (AAII) Sentiment Survey, neutral sentiment among retail investors has increased.

The data reflects a change in expectations regarding the short-term stock outlook, with both bullish and bearish sentiments declining.

AAII reported that neutral sentiment—investors expecting stock prices to remain largely unchanged over the next six months—rose by 3.9 percentage points to 26.7%.

Despite this increase, neutral sentiment is still below its historical average of 31.5%, which has persisted for the 12th week in a row.

The survey also shows that bullish sentiment, indicating expectations for rising stock prices, saw a modest decline of 1.2 percentage points, settling at 49.6%. This figure, though lower than last week, remains notably higher than the historical average of 37.5% and has been unusually high for two consecutive weeks. AAII notes, “Bullish sentiment is above its historical average for the 46th time in 47 weeks.”

Conversely, bearish sentiment, suggesting expectations that stock prices will fall, decreased by 2.7 percentage points to 23.7%. This marks the sixth occasion in seven weeks that bearish sentiment has stayed below its historical average of 31.0%.

Additionally, the bull-bear spread—calculated by subtracting bearish sentiment from bullish sentiment—expanded by 1.5 percentage points to 25.9%, significantly exceeding its historical average of 6.5%.

In a special question asked to AAII members regarding the Federal Reserve’s recent decision to cut interest rates by 0.50 percentage points, 57.3% supported the move, while 29% believed the cut should have been smaller.

This week’s survey indicates a growing caution among investors, as the rise in neutral sentiment suggests a wait-and-see approach among more investors.