Members Split on Whether First-Quarter Results Change Their Outlook

Posted on May 21, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members if first-quarter earnings have influenced their six-month outlook for stocks. About three of out every 10 respondents (31%) said recent earnings announcements have made them more bearish over the next six months. Nineteen percent described themselves as being bullish over the next six months. Close to 50% of respondents said that first-quarter earnings results have not affected their six-month outlook on the stock market.

Here is a sampling of the responses:

  • “Confirming my opinion, market earnings were not as robust as many analyst had expected.”
  • “A diversified portfolio will go up and down in the short term. I intend to maintain my allocations, and the first quarter reports are irrelevant to me.”
  • “First-quarter earnings are prompting me to take a more cautious outlook on stocks and to think about a larger investment in bond funds.”
  • “I am in it for the long run and try to ignore the daily flack. I believe over the long run stocks should be part of my portfolio.”
  • “Affirmed my moderately bullish outlook.”
  • “Not materially, first-quarter 2015 earnings were pretty much as expected for most companies I follow.”


AAII Sentiment Survey: Neutral Sentiment Stays Above 45% for Record Stretch

Posted on May 21, 2015 | AAII Survey

Neutral sentiment set a new record for the longest stretch above 45%, which has now reached its seventh consecutive week. Optimism set a new two-year low for the third consecutive week in the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 1.5 percentage points to 25.2%. This is the lowest amount of optimism recorded by our survey since April 11, 2013 (19.3%). The drop keeps optimism below its historical average of 39% for the 11th week in a row. This streak now ties an 11-week below-average stretch between March 20 and May 29, 2014.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 2.9 percentage points to 49.8%. The increase keeps neutral sentiment above 45% for the seventh consecutive week and above its historical average of 31.0% for the 20th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 1.4 percentage points to 25.0%. This is the 17th week this year where pessimism has been below its historical average of 30%.

Neutral sentiment set a new record for consecutive weeks above 45%, beating a 27-year record. Neutral sentiment stayed above 45% on six consecutive weeks between May 13 and June 17, 1988. The new record of seven weeks above 45% spans from April 9 to May 21, 2015.

Bullish sentiment remains at an unusually low level, while neutral sentiment continues to stay at an unusually high level. Historically, such readings—both unusually high low bullish sentiment and unusually high neutral sentiment—have been correlated with better-than-average market performance over the following six- and 12-month periods. (See Analyzing the AAII Sentiment Survey Without Hindsight in the June 2014 AAII Journal for more information.) There is no guarantee history will repeat itself in the future, however.

Causing some AAII members to be cautious or pessimistic are prevailing valuations, recent price volatility, geopolitical events, the pace of economic growth, the impact of the stronger dollar on earnings growth and worries that a notable decline in stock prices could occur. Keeping other AAII members encouraged are the ongoing bull market, sustained economic expansion, earnings growth and still-accommodative monetary policy.

This week’s AAII Sentiment Survey results:

  • Bullish: 25.2%, down 1.5 percentage points
  • Neutral: 49.8%, up 2.9 percentage points
  • Bearish: 25.0%, down 1.4 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 31.0%
  • Bearish: 30.0%

The AAII Sentiment Survey has been conducted weekly since June 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.



BUY OF THE WEEK 5/19/2015

Posted on May 19, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Shire PLC (SHPG) is his “Buy of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Buy of the week




Change in Oil Prices Has Minor Impact on Investor Attitudes

Posted on May 14, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members how the rebound in oil prices has impacted their six-month outlook for stock prices. About 12% of respondents said that the rebound affected their outlook negatively. Approximately 27% said that the increase in oil prices affected their outlook favorably. The majority of respondents, 61%, felt that the change in the price of oil has not altered their outlook.

Here is a sampling of the responses:

  • “The oil market improvement has not really affected my outlook. The present international situation, the Federal Reserve intervention and slow growth of the economy have the most impact on my outlook.”
  • “No, I’m more focused on corporate earnings and GDP growth.”
  • “Very little. I think the underlying competitive struggle between U.S. and Middle East (particularly Saudi Arabia) will leave the price movement neutral on average over the period.”
  • “Modest increases in oil prices should have a positive impact on stock prices.”
  • “Bullish impact because the partial rebound in oil prices will partially reverse the dramatic downturn in the energy sector caused by the oil price collapse.”
  • “Negative impact on market due to fewer investment dollars.”


AAII Sentiment Survey: Optimism Falls to a New Two-Year Low

Posted on May 14, 2015 | AAII Survey

Optimism set a new two-year low for the second consecutive week in the latest AAII Sentiment Survey. Neutral sentiment stayed above 45% for a sixth consecutive week, tying a 27-year record, while pessimism declined slightly.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 0.3 percentage points to 26.7%. This is the lowest level of optimism since April 11, 2013 (19.3%). Bullish sentiment remains below its historical average of 39% for a 10th week in a row. This streak is the longest since an 11-week stretch between March 20 and May 29, 2014.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 0.8 percentage points to 46.9%. The increase keeps neutral sentiment above 45% for the sixth consecutive week and above its historical average of 31% for the 19th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 0.5 percentage points, to 26.4%. This is the 16th week this year where pessimism has been below its historical average of 30.0%.

The current streak of six consecutive weekly neutral sentiment readings at or above 45% ties a record last set in 1988. Neutral sentiment stayed above 45% on consecutive weeks between May 13 and June 17, 1988. It was at or above 45% on consecutive weeks between January 22 and February 26, 1988. (Prior to 2000, the sentiment readings were rounded to the nearest full digit.)

Bullish sentiment remains at an unusually low level, while neutral sentiment continues to stay at an unusually high level. Historically, such readings—both unusually high low bullish sentiment and unusually high neutral sentiment—have been correlated with better-than-average market performance over the following six- and 12-month periods. (See Analyzing the AAII Sentiment Survey Without Hindsight in the June 2014 AAII Journal for more information.) There is no guarantee history will repeat itself in the future, however.

Causing some AAII members to be cautious or pessimistic are prevailing valuations, recent price volatility, geopolitical events, the pace of economic growth, the impact of the stronger dollar on earnings growth and worries that a notable decline in stock prices could occur. Keeping other AAII members encouraged are the ongoing bull market, sustained economic expansion, earnings growth and still-accommodative monetary policy.

This week’s AAII Sentiment Survey results:

  • Bullish: 26.7%, down 0.3 percentage points
  • Neutral: 46.9%, up 0.8 percentage points
  • Bearish: 26.4%, down 0.4 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 31.0%
  • Bearish: 30.0%

The AAII Sentiment Survey has been conducted weekly since June 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.). The survey and its results are available online at: http://www.aaii.com/sentimentsurvey.



Sell OF THE WEEK 5/13/2015

Posted on May 13, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Perrigo Company (PRGO) is his “Sell of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Sell of the week





BUY OF THE WEEK 5/12/2015

Posted on May 12, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why The Blackstone Group L.P. (BX) is his “Buy of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Buy of the week




AAII WEEKLY FEATURES 5/12/2015

Posted on May 12, 2015 | Weekly Features

Investor-Update

This week’s AAII Weekly Features has been updated.
View this week’s Top AAII Articles, Featured Stock Screen and Member Question.

Read more »



The Sequence in Which Returns Occur Affects Your Wealth

Posted on May 9, 2015 | AAII Journal

One of the big uncertainties facing investors is the sequence of returns they will experience in the future.

Sequence of returns refers to the order in which positive and negative returns occur over a given time period. The sequence of returns is particularly important during the period surrounding the transition into retirement when an investor moves from accumulating assets to drawing down his or her savings.

The sequence of returns poses two challenges. First, it is impossible to predict how the markets will perform over an extended period. While valuation measures, for instance, can offer insight into the prevailing long-term attractiveness or elevated risk level of the market, they cannot accurately predict how stocks will actually perform in the future. Secondly, a period of negative absolute returns or low real (inflation-adjusted) returns can adversely affect an investor’s ability to withdraw a desired amount of cash flows.

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Two Dividend Increases, Plus the Monthly Report

Posted on May 8, 2015 | Dividend Investing

This week markets reacted to comments from Federal Reserve Chair Janet Yellen that equity valuations are “quite high.” On top of Yellen’s comments, an upbeat U.S. service-industry release and a rally in crude oil prices sent the 10-year U.S. Treasury yield soaring to its highest level in two months, while Treasury bond prices dropped for a seventh consecutive session (bond prices fall as their yields rise). By Friday, most U.S. indexes had recovered their losses from earlier in the week, riding on the back of a better-than-expected jobs report.

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