AAII Sentiment Survey: Neutral Sentiment Nears 40%

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Neutral sentiment rose to its second-highest level of the year, nearing 40%. The latest AAII Sentiment Survey also shows higher pessimism and lower optimism.

Bullish sentiment, expectations that stock prices will rise over the next six months, pulled back by 4.1 percentage points to 33.2%. Optimism is below its historical average of 38.5% for the fourth consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, edged up 0.3 percentage points to 39.6%. The increase puts neutral sentiment near the upper end of its nine-week range of 35.3% to 39.8%. This is the 10th time in 12 weeks with a neutral sentiment reading above its historical average of 31.0%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 3.8 percentage points to 27.2%. This is the seventh time in eight weeks that pessimism is below its historical average of 30.5%.

At current levels, all three indicators are within their typical historical ranges. The boundary between typical and unusually high neutral sentiment readings is 40.0%.

This year&a;rsquo;s rebound in stock prices has encouraged some individual investors, though others have concerns about its sustainability. Many individual investors are monitoring trade negotiations, though the impact varies by investor. Also having an influence are Washington politics (including President Trump and Democratic control of the House of Representatives), corporate earnings, the Federal Reserve, valuations and concerns about the pace of economic growth.

This week&a;rsquo;s special question asked AAII members what they thought the likelihood of interest rates being held steady for at least the remainder of the year was. Slightly more than a third of all respondents (34%) think holding rates steady is a good idea. An additional 24% view the odds of another rate hike occurring this year as being unlikely. Many respondents in both groups cite signs of a slowing economy and uncertain trade headlines. Nearly 12% believe a rate cut is a more likely occurrence than a rate hike. About 14% think another rate hike occurring later this year is still a possibility.

Here is a sampling of the responses:

&l;/p&g;&l;ul&g;&l;li&g;&a;ldquo;In my opinion, the Federal Reserve believes the economy has reached a balance between inflation and recession-type pressures.&a;rdquo;&l;/li&g; &l;li&g;&a;ldquo;I believe interest rates will remain steady because the global economy is slowing.&a;rdquo;&l;/li&g; &l;li&g;&a;ldquo;A cut is more likely than an increase with the global slowdown ultimately affecting the U.S.&a;rdquo;&l;/li&g; &l;li&g;&a;ldquo;It is very likely that the interest rates won&a;rsquo;t be raised, although with the Fed being data-driven, that could change.&a;rdquo;&l;/li&g; &l;li&g;&a;ldquo;I look for them to move rates up in September or October.&a;rdquo;&l;/li&g; &l;/ul&g;

&l;a href=&q;https://www.aaii.com&q; target=&q;_blank&q;&g;&l;img class=&q;size-full wp-image-59703&q; src=&q;http://blogs-images.forbes.com/investor/files/2019/03/sentiment-chart-03-28-19.gif?&q; alt=&q;&q; data-height=&q;596&q; data-width=&q;692&q;&g;&l;/a&g; As of March 28, 2019

This week&a;rsquo;s AAII Sentiment Survey results:

&l;ul&g;&l;li&g;Bullish: 33.2%, down 4.1 percentage points&l;/li&g; &l;li&g;Neutral: 39.6%, up 0.3 percentage points&l;/li&g; &l;li&g;Bearish: 27.2%, up 3.8 percentage points&l;/li&g; &l;/ul&g;

Historical averages:

&l;ul&g;&l;li&g;Bullish: 38.5%&l;/li&g; &l;li&g;Neutral: 31.0%&l;/li&g; &l;li&g;Bearish: 30.5%&l;/li&g; &l;/ul&g;&l;em&g;The AAII Sentiment Survey has been conducted weekly since July 1987. The survey and its results are&l;span&g;&a;nbsp;&l;/span&g;&l;/em&g;&l;a href=&q;http://www.aaii.com/sentimentsurvey&q; rel=&q;nofollow&q; target=&q;_blank&q;&g;&l;em&g;available online.&l;/em&g;&l;/a&g;

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