Investor Optimism At Highest In One Year: Survey

Investor optimism for a rising stock market is at the highest level in a year.

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The latest poll by American Association of Individual Investors shows that 51.6 percent of respondents expect stock prices to rise over the next six months.

Boosted by improving economic data and corporate earnings, the Dow is up about 15 percent since mid-December.

Optimism, sometimes seen as a contrarian indicator, was last at this level on Jan. 13, 2011. Bullish sentiment has been above its historical average of 39 percent for eight of the past nine weeks.

“There is less fear, and less chatter, about a double-dip recession. Continued growth in corporate profits is also playing a role, as is the rebound in stock prices,” says Charles Rotblut, vice president at AAII.

However, Europe's sovereign debt issues and slow domestic economic growth remain a concern for many investors, the survey found.

“There seems to be more hope that the contagion won't spread to the United States. But I do think that if the european sovereign debt situation worsens, we could see bearish sentiment start to rise again,” warns Rotblut.

Only 20.2 percent of respondents expect stock prices to fall over the next six months. This is the seventh time in the past eight weeks that bearish sentiment has been below its historical average of 30 percent.

Meanwhile, neutral sentiment, expectations that stock prices will stay essentially flat over the next six months, is down to 28.2 percent. This is just the second time in six weeks that neutral sentiment has been below its historical average of 31 percent.

The survey also asked AAII members for their thoughts on Facebook’s initial public offering and whether they will consider buying shares of the stock.

“The overwhelming majority of respondents said they wouldn’t invest in Facebook, especially during or right after the IPO,” says the survey. “Many think there is already too much excitement for the offering. Others were worried that the company is a fad or said that they didn’t fully understand the industry.”

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