Pessimism among retail investors is on the rise, AAII By Investing.com survey shows

Investing.com — Pessimism among retail investors is on the rise, according to the latest sentiment survey from the American Association of Individual Investors (AAII).

The firm’s survey, which measures individual investors’ expectations of stock prices over the next six months, revealed a shift in sentiment.

Bearish sentiment, which reflects expectations that stock prices will fall, rose 3.3 percentage points to 27.0%.

However, the AAII says that despite this increase, bearish sentiment remains below its historical average of 31.0% for the third week in a row.

The increase in pessimism comes as optimistic and neutral sentiments have declined.

Bullish sentiment, representing the expectation that stock prices will rise over the next six months, fell slightly by 0.5 percentage points to 51.2%.

Despite the decline, bullish sentiment is said to be still significantly above its historical average of 37.5%. “Optimistic sentiment is unusually high for the second week in a row,” says AAII.

This marks the 42nd time in the last 43 weeks that bullish sentiment has exceeded its long-term average.

Neutral sentiment, which indicates expectations that stock prices will remain broadly unchanged, saw a more substantial decline, falling 2.9 percentage points to 21.9%. This level is below the historical average of 31.5% for the eighth consecutive week.

The bull-bear spread, which is the difference between bullish and bearish sentiment, narrowed 3.8 percentage points to 24.2%.

However, the AAII reveals it remains well above its historical average of 6.5%, marking the 16th time in 17 weeks that the spread has been wider than usual.

The survey also touched on investors’ views on gold prices, with most expressing skepticism about their sustainability over the next year. 29.7% of survey respondents believe the price of gold will fall moderately. Meanwhile, 27.0% believe gold prices will continue to rise.