AAII Sentiment Survey: Optimism Falls to Lowest Level in a Year

Posted on April 17, 2014 | AAII Survey

Optimism among individual investors is now at levels not seen in 12 months, according to the latest AAII Sentiment Survey. Neutral sentiment, meanwhile, is above average for the 15th consecutive week.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 1.3 percentage points to 27.2%. Optimism was last lower on April 18, 2013. Bullish sentiment is also now below its historical average of 39.0% for the fifth consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 1.1 percentage points to 38.5%. This puts neutral sentiment above its historical average of 30.5% for the 15th consecutive week. The last time a similar streak occurred was in 1999.

Bearish sentiment, expectations that stock prices will fall over the next six months, edged up 0.1 percentage points to 34.3%. The modest increase puts pessimism at a 10-week high. It also puts bearish sentiment above its historical average of 30.5% on back-to-back weeks for the first time since January 30 and February 6, 2014.

Bullish sentiment is now at an unusually low level, or more than one standard deviation below its historical average. Historically, such readings have been a contrarian signal. Optimism can stay at below-average levels for a period of time, however. It is also important to realize that many AAII members are long-term investors and do not make portfolio decisions solely based on changes in their short-term expectations.

The drop in bullish sentiment comes as downward volatility has returned to the market. The recent decline in stock prices has heightened concerns that a market top has been formed and that valuations may have become too high. Also playing a role is the pace of revenue growth, the slow rate of economic expansion and Washington politics. Keeping some individual investors from being pessimistic is earnings growth, economic expansion, the Federal Reserve’s tapering of bond purchases and low interest rates.

This week’s special question asked AAII members what they think about the decline experienced by highly valued momentum stocks such as Netflix (NFLX) and Facebook (FB) since the start of March. About 60% of respondents said these stocks were overvalued and/or that they were not surprised to see the share prices fall. A small number of respondents (5%) thought the declines are a precursor to a further decline in the broad market indexes.

Here is a sampling of the responses:

  • “About time. They were way overpriced for their revenue models and long-term outlooks.”
  • “They were overvalued and are still overvalued!”
  • “They didn’t deserve their valuation and needed to be knocked down.”
  • “I am glad I did not buy into the hype or the noise.”

This week’s AAII Sentiment Survey results:

  • Bullish: 27.2%, down 1.3 percentage points
  • Neutral: 38.5%, up 1.1 percentage points
  • Bearish: 34.3%, up 0.1 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • Bearish: 30.5%

The AAII Sentiment Survey has been conducted weekly since July 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



Finding Value and Financial Strength Based on “What Works on Wall Street”

Posted on April 16, 2014 | AAII Journal

Investors seem to be programmed by nature to fail at investing, pouring money into last year’s hot stock, industry or asset class.

James P. O’Shaughnessy provides a detailed examination of investment strategies in the fourth edition of his book “What Works on Wall Street: The Classic Guide to the Best-Performing Investment Strategies of All Time” (McGraw-Hill, 2011).

O’Shaughnessy argues that the majority of investors fail to beat market averages because they do not follow a disciplined approach to investing. Instead, investors let the emotions surrounding the market overpower their judgment and push them off their planned investment course. Investors tend to chase investments with the best recent performance, while ignoring anything that happened more than three to five years ago. Furthermore, O’Shaughnessy makes the case that the markets are not random. The stock market does not move around without any rhyme or reason; it “rewards certain investment strategies while punishing others.”

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Sell OF THE WEEK 4/16/2014

Posted on April 16, 2014 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Tyco International (TYC) 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





AAII WEEKLY FEATURES 4/15/2014

Posted on April 15, 2014 | 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.

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THE APril 2014 PASSING COMPANY LISTS AND PERFORMANCE DATA IS NOW AVAILABLE ON-LINE

Posted on April 15, 2014 | Stock Screens

YTD Return of Top Performers: ADR Screen 25.2% — O’Shaughnessy: Tiny Titans 19.7%

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BUY OF THE WEEK 4/15/2014

Posted on April 15, 2014 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why GATX Corp. (GMT) 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




April 2014 AAII MODEL PORTFOLIOS UPDATED

Posted on April 15, 2014 | Model Portfolios

1-Year Returns as of 3/31/14: AAII Fund Portfolio 19.1% — AAII Shadow Stock Portfolio 27.0%

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Upcoming Chapter Meeting: AAII Los Angeles

Posted on April 12, 2014 | Local Chapters


Date: Saturday, April 19, 2014
Topic: Global Value: Spotting Bubbles, Avoiding Crashes, and Big Returns
Speaker: Mebane Faber, Chief Investment Officer, Cambria Investment Management

Investment bubbles and manias have existed within markets throughout human history, but investors can learn to avoid the extreme losses that occur when those bubbles burst. Using the time-tested method of valuing securities with earnings smoothed over many years can be very helpful. We can then create a trading system to build global stock portfolios based on valuation, and find significant outperformance by selecting markets based on relative and absolute valuation. In this presentation, Mebane Faber will explain how to do this.

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Upcoming Chapter Meeting: AAII Washington D.C. Metro

Posted on April 12, 2014 | Local Chapters


Date: Saturday, April 19, 2014
Topic: Managing Your Money During Retirement
Speaker: Maria Crawford Scott, Former Editor, AAII Journal

This presentation discusses the best methods for investing and managing your savings during your retirement years. It focuses on how much you can safely withdraw from your portfolio each year to ensure your nest egg supports you throughout your lifetime, withdrawal rules to help squeeze out more from your portfolio and what kind of asset allocation mix is most appropriate during your retirement.

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March 2014 AAII ASSET ALLOCATION MODELS UPDATED

Posted on April 11, 2014 | Asset Allocation

STOCKS – 1 YEAR

Large-Cap Stocks: 21.65%
Mid-Cap Stocks: 20.71%
Small-Cap Stocks: 25.11%
International Stocks: 17.22%
Emerging Markets Stocks: -2.98%

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