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INDIVIDUAL INVESTOR SENTIMENT IMPROVES, BUT CONFIDENCE IN THE CONSUMER IS LACKING - AAII

Optimism among individual investors made a bit of a comeback in the latest American Association of Individual Investors (AAII) Sentiment Survey, while both pessimism and neutral views pulled back.

That said, there’s still a pretty cautious tone beneath the surface. Nearly three-quarters of investors surveyed said they think the average consumer is actually worse off now than at the start of the year.

Digging into the numbers, bullish sentiment, or the share of investors expecting stocks to rise over the next six months, climbed 3.9 percentage points to 35.6%. Even with that bounce, it’s still a touch below its long-term average of 37.5%, marking the second time in six weeks it’s come in under that level.

Bearish sentiment eased slightly, dipping 1.8 percentage points to 41.9%. That said, it's still "unusually high." It’s still well above its historical average of 31.0%, and has now stayed elevated for 16 straight weeks.

Neutral sentiment also edged lower, falling 2.1 percentage points to 22.6%. This reading is "unusually low," and it's now been below its 31.5% average for the 97th time in 99 weeks -- part of a long stretch where relatively few investors expect the market to simply move sideways.

Putting it all together, the bull-bear spread, a key gauge of overall sentiment, improved 5.6 percentage points to -6.3% from about -11.9% last week. Still, it's below its historical average of 6.5% for the 15th time in 16 weeks.

As part of this week’s survey, AAII also asked investors how they think the average consumer is doing compared to the start of the year, and the response suggests confidence in the broader economic backdrop remains fairly weak.

Here is AAII's graphic showing how they responded.

(Terence Gabriel)

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