Investors' bullish, bearish sentiment returning to historical averages

American retail investors are becoming less bullish, more bearish as sentiment returns to near long-term averages in both respects.

The latest weekly AAII Investor Sentiment Survey reveals that bullish sentiment – that stocks will rise over the next six months - has tumbled by almost 8 points to 37.7% this week, just short of the 37.5% historical average, while bearishness – expectation of falling stock prices - increased 4.5 points to 29.9%, not far from the 31% historical average.

The share of respondents who are neutral on stock market prices also increased, by more than three points to 32.4%, putting it above the historical average of 31.5% for the first time in 16 weeks.

The bull-bear spread (bullish minus bearish sentiment) decreased 12.3 percentage points to 7.8%. The bull-bear spread is above its historical average of 6.5% for the 24th time in 25 weeks.

The AAII survey also asked investors about the most important information that they are looking for in the current earnings season. The top answers were:

• Whether earnings were better or worse than expected: 29.1%
• Guidance on future revenues and earnings: 26.5%
• Sales and/or earnings growth: 22.8%
• Fundamentals such as the balance sheet or cash flow: 16.4%

The recent Morgan Stanley Wealth Management quarterly retail investor pulse survey shows that 59% of respondents are bullish, although this is two points lower than in the previous quarter as the presidential election approaches and geopolitical tensions rise.