LIVE MARKETS-AAII pessimism climbs as investors turn more cautious 

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AAII PESSIMISM CLIMBS AS INVESTORS TURN MORE CAUTIOUS

Individual investors grew more cautious in the latest American Association of Individual Investors (AAII) Sentiment Survey, with bearish sentiment rising while both bullish and neutral views slipped.

The survey showed 45.8% of respondents expected stock prices to fall over the next six months, an increase of 4.2 percentage points from last week. Bearish sentiment is unusually high and has been above its 31.5% historical average for 37 straight weeks.

Meanwhile, bullish sentiment, or the percentage of respondents who expect stocks to rise over the next six months, edged down 1.9 percentage points to 36.9%. That's slightly below its historical average of 37.5% and the fourth time in the past six weeks that optimism has come in below that level.

Neutral sentiment, or the percentage of respondents who expect stock prices to remain essentially unchanged over the next six months, also declined, falling 2.3 percentage points to 17.3%. Neutral sentiment is unusually low and has been below its historical average of 31.0% for 33 consecutive weeks.

As a result, the bull-bear spread, a measure of overall investor sentiment, deteriorated to minus 8.9% from minus 2.9% a week earlier. The spread has now remained below its historical average of 6.5% for 14 consecutive weeks.

Taken together, the results suggest individual investors remain wary about the market's near-term prospects even as the major indexes continue to hover near record highs.

In this week's special question, AAII asked members how inflation is affecting their portfolio decisions. Investors were divided nearly equally among the three primary responses.

The chart below breaks down the responses.

(Terence Gabriel)

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