Bullish Sentiment Sees Largest Weekly Gain in 3 Years, AAII Says

Bullishness among individual investors increased the most in almost three years after the Dow Jones Industrial Average rallied to a record high, according to a survey by the American Association of Individual Investors.

Expectations that stock prices will rise over the next six months rose 14 percentage points to 45.4 percent, putting optimism at a six-week high, Charles Rotblut, vice president and editor of the AAII Journal, said in a report today. The weekly gain was the biggest since July 15, 2010. The historical average for market optimism is 39 percent.

“The current level of bullish sentiment is not excessive, but it does in part reflect the Dow Jones industrial average’s nine-day winning streak,” Rotblut wrote. “While the streak has prompted some investors to be more optimistic about the short-term direction of stock prices, many AAII members remain leery that stocks are overbought and due for a correction.”

Expectations that stock prices will fall over the next six months, or bearish sentiment, remained above its historical average for a fourth week, even as pessimism fell 6.5 percent to 32 percent of investors surveyed. Neutral sentiment, expectations that prices will remain steady, reached its lowest level since Nov. 15, 2012, falling 7.9 percent to 22.5 percent of investors.

The record set by the Dow Jones Industrial Average of 14,253.77 on March 5 has made 17 percent of investors surveyed more cautious, according to the survey. About 11 percent of respondents said they feel more confident, and approximately 30 percent of people said the record had no effect on their opinion of the attractiveness of stocks.

The Standard & Poor’s 500 Index is about five points away from its record closing level of 1,565.15 set in October 2007. The gauge has more than doubled from its bottom in 2009, fueled by corporate earnings that topped estimates and monetary stimulus from the Federal Reserve. The Dow has set record closing highs for seven straight days.