Earnings Less Influential Than Market Moves

Posted on August 27, 2015 | AAII Survey

This week’s Sentiment Survey special question, which was posted at the very beginning of the survey period, asked AAII members how second-quarter earnings have influenced their outlook for stock prices. Nearly 40% of respondents said that the quarterly results did not influence their outlook, with several citing their long-term investment strategy as the reason why. An additional 7% said that other factors are more influential, such as the concerns about global economic weakness. About 9% of respondents described themselves as being more cautious or pessimistic because of second-quarter earnings. Only 5% of respondents said that corporate earnings made them more optimistic. A few members directly mentioned the recent correction instead of answering this week’s special question, though the comments were varied.

Here is a sampling of the responses:

  • “One quarter’s earnings never influence my outlook for the long term.”
  • “The bigger concern is the global slowdown.”
  • “Earnings were okay, but the outlooks given by companies were not very comforting.”
  • “Earnings were good and I am still optimistic on the economy.”
  • “Not at all. The current sell-off is the primary influence on my outlook.”


AAII Sentiment Survey: Both Optimism and Pessimism Surge

Posted on August 27, 2015 | AAII Survey

Both optimism and pessimism jumped in the latest AAII Sentiment Survey. Neutral sentiment, meanwhile, plunged to a nearly nine-month low.

Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 5.7 percentage points to 32.5%. Optimism was last higher on June 25, 2015 (35.6%). (Bullish sentiment was also at 32.5% on July 23, 2015.) Even with this week’s increase, bullish sentiment remains below its historical average of 39.0% for the 25th consecutive week, the longest such streak since a 29-week stretch in 1993.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, plunged 10.6 percentage points to 29.2%. The large drop puts neutral sentiment at its lowest level since January 1, 2015 (29.0%). It also ends a record streak of 33 consecutive weeks with readings above the historical average of 31.0%.

Bearish sentiment, expectations that stock prices will fall over the next six months, surged 4.9 percentage points to 38.3%. Pessimism was last higher on July 29, 2015 (40.7%). This week’s rise keeps bearish sentiment above its historical average of 30.0% for a fifth consecutive week.

The recent streak of above-average bearish sentiment is part of a broader shift we’ve seen this summer. Pessimism has been above its historical average during eight out of the past 12 weeks. During the entire 52-week period prior to June 2015, bearish sentiment was above its historical average of 30.0% just nine times. Furthermore, bearish sentiment has now exceeded bullish sentiment for five consecutive weeks. This is the longest such occurrence since a seven-week stretch between October 11 and November 22, 2012.

This week’s concurrent increases in optimism and pessimism are indicative of the mixed view that individual investors likely have of the surge in volatility that occurred over the survey period, which runs from 12:01 a.m. on Thursday to 11:59 p.m. on Wednesday. Some members had previously stated that they were looking for a drop in prices to bring valuations down and create a buying opportunity. Others may be concerned that the market is at risk of further downside.

This week’s AAII Sentiment Survey results:

  • Bullish: 32.5%, up 5.7 percentage points
  • Neutral: 29.2%, down 10.6 percentage points
  • Bearish: 38.3%, up 4.9 percentage points

Historical averages:

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

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.



Sell OF THE WEEK 8/26/2015

Posted on August 26, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why CommVault Systems (CVLT) 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 8/25/2015

Posted on August 25, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Celadon Group (CGI) 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





Members Wish for Federal Reserve Clarity, Change in Gov. Policies

Posted on August 20, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members what one thing about the current market environment they would change if they had a magic wand. We received a wide variety of answers, but were able to group the responses into broad categories. The largest group of respondents (21%) singled out the Federal Reserve, with many calling for either an increase in interest rates or clarity on the timing of the first rate hike. Equal numbers, about 13% per group, want a change in government policies or a change in market conditions. Those wanting a change in policies discussed the tax code, regulations (both for and against) and reducing the federal debt. Lower volatility was the most desired change in market conditions, though some members want prices to fall in order to reduce prevailing valuations. An additional 8% would like to see less short-term trading and thinking. China was cited by 9% of respondents with individual investors wanting stronger economic growth or a more freely traded yuan.

Here is a sampling of the responses:

  • “Get the first rate hike over with already. It’s not as big of a deal as people make it out to be.”
  • “Stop the large up and down action.”
  • “I would like to see a realistic plan to balance the federal budget.”
  • “Not allow China to manipulate their currency.”
  • “Stabilization in crude oil prices, to that the oil industry might recover.”
  • “I wish median P/E ratios were lower.”


AAII Sentiment Survey: Neutral Sentiment Rises, Sets A New Record

Posted on August 20, 2015 | AAII Survey

Neutral sentiment’s rise in this week’s AAII Sentiment Survey kept it above its historical average for a record 33rd consecutive week. The previous record of 32 consecutive weeks was set last year. This week’s rise in neutral sentiment occurred as both optimism and pessimism declined.

Bullish sentiment, expectations that stock prices will rise over the next six months, pulled back by 3.6 percentage points to 26.8%. The drop keeps optimism below its historical average of 39.0% for the 24th consecutive week, the longest such streak since a 29-week stretch in 1993.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 6.4 percentage points to 39.8%. The rise keeps neutral sentiment above its historical average of 31.0% for a record 33rd consecutive week, as noted above. The previous record streak of 32 consecutive weeks was set between January and August of last year.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 2.8 percentage points to 33.3%. Even with the decline, pessimism is above its historical average of 30.0% for a fourth consecutive week. The last time bearish sentiment was last above its historical average on four consecutive weeks was between April 11 and May 2, 2013.

Bullish sentiment is back at an unusually low level. Such readings have historically been correlated with above-median returns for the S&P 500. (There is no guarantee that history will repeat, however.) Neutral sentiment is right at the top end of its typical historical range.

The record streak of above-average readings for neutral sentiment has occurred as the S&P 500 has been essentially flat for several months. According to Driehaus Capital Management, the S&P 500 fluctuated within a 4.44% range during the six-month period ended August 13, 2015. Driehaus describes this as the narrowest trading range on record.

Giving AAII members reasons for caution are concerns about the possibility of a sizable decline in stock prices occurring, the pace of economic growth, the lack of wage growth, valuations, the impact of the stronger dollar on earnings and geopolitical events. The lack of market breadth and ongoing daily volatility on are also playing a role. Keeping other AAII members optimistic is the Federal Reserve’s still-accommodative monetary policy, the ongoing bull market, sustained economic expansion and earnings growth.

This week’s AAII Sentiment Survey results:

  • Bullish: 26.8%, down 3.6 percentage points
  • Neutral: 39.8%, up 6.4 percentage points
  • Bearish: 33.3%, down 2.8 percentage points

Historical averages:

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

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.



Sell OF THE WEEK 8/19/2015

Posted on August 19, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Baxalta (BXLT) 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





Alternatives to Excel

Posted on August 18, 2015 | Computerized Investing

Microsoft Excel is the gold standard of spreadsheet software, and some may argue it is equally expensive as gold. But if you’re not willing to pay the premium price, what are your alternatives? When making any price comparison (especially when comparing to a free option), you have to assess what the opportunity cost may be of switching to a free or lower-cost spreadsheet.

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BUY OF THE WEEK 8/18/2015

Posted on August 18, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Gilead Sciences (GILD) 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





The August 2015 passing company lists and performance data is now available on-line.

Posted on August 17, 2015 | Stock Screens

YTD Return of Top Performers: Foolish Small Cap 8: 70.9% — O’Neil’s CAN SLIM Revised 3rd Edition: 45.6%

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