AAII Sentiment Survey: Pessimism Declines, But Optimism Stays Below Average

Posted on June 13, 2013 | AAII Survey

Pessimism declined this week, though the rebound in optimism was not enough to push it back above its historical average in the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 3.5 percentage points to 33.0%. This is the third consecutive week and the 13th out of the last 16 weeks that optimism has been below its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, edged up 0.9 percentage points to 32.4%. This is the third consecutive week and the ninth in the past 12 weeks that neutral sentiment is above its historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 4.4 percentage points to 34.6%. This is the second consecutive week that pessimism is above its historical average of 30.5%.

We are continuing to see volatility in sentiment, a sign of the ongoing uncertainty about market direction. As I noted last week, bullish sentiment has fluctuated within a 26.1-point range and bearish sentiment has fluctuated within a 32.9-point range since the start of March. This week’s readings for bullish, neutral and bearish sentiment are all within their typical historical ranges.

Worries about the effect of a change in Federal Reserve policy lessened this week. Prevailing valuations, the slow pace of economic growth and a lack of progress on key issues by the White House and Congress continue to concern many AAII members. Others, however, are encouraged by the length of the current rally and signs of continued economic growth.

This week’s special question asked AAII members what economic trends they are currently watching. The state of the labor market was the most popular trend, named by 36% of respondents. Interest rates and the bond market was a close second, listed by 32% of respondents. Federal policy ranked third, cited by 17% of respondents. Notably, Japan is being monitored as closely as China is, with 7% of respondents saying they were following events in one or both countries. (Many AAII members listed more than one economic indicator in response to the special question.)

This week’s AAII Sentiment Survey results:

Bullish: 33.0%, up 3.5 percentage points
Neutral: 32.4%, up 0.9 percentage points
Bearish: 34.6%, down 4.4 percentage points

Historical averages:

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

A new historical analysis of the AAII Sentiment Survey found that a correlation between low levels of optimism and good stock market performance over the following six- and 12-month periods exists. The analysis (Is the AAII Sentiment Survey a Contrarian Indicator?) is published in the June 2013 AAII Journal.

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

Charles Rotblut. CFA is a Vice President with the American Association of Individual Investors and editor of the AAII Journal.



Upcoming Chapter Meeting: AAII Twin Cities

Posted on June 13, 2013 | Local Chapters

Date: Thursday, June 20, 2013
Topic: Thought-Provoking Equity Themes for the Thoughtful Investor
Speaker: Jeffrey W. Huge, Chartered Market Technician, Market Technicians Association

Jeffrey Huge will introduce the audience to the key concepts of technical analysis, as he employs them to analyze markets and securities. Discussed will be various top-down methodologies that provide insights into the macroeconomic backdrop. He will present five timely equity market themes with good risk/reward potential, and five more that he is currently exploring for opportunities. As usual, there will be time for questions.

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AAII Sentiment Survey

Posted on June 12, 2013 | Podcast

Charles Rotblut speaks with Chuck Jaffe on the Your Money Life Show about the AAII Sentiment Survey. Listen to hear his insights about whether investor sentiment can be used to determine when the market will reverse direction.

Audio url: Sell of the week





Sell OF THE WEEK 6/12/2013

Posted on June 12, 2013 | Podcast

AAII Journal Editor Charles Rotblut Editor explains to Chuck Jaffe of MarketWatch why Illinois Tool Works (ITW) 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 6/11/2013

Posted on June 11, 2013 | Podcast

AAII Journal Editor Charles Rotblut Editor explains to Chuck Jaffe of MarketWatch why Qualcomm (QCOM) 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





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Posted on June 10, 2013 | AAII Journal

Staying within or below a 4% to 5% withdrawal rate (adjusted annually for inflation) will decrease your risk of outliving your retirement savings.

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Posted on June 10, 2013 | Computerized Investing

Wisebread.com showcases a community of bloggers who write about how to adopt a money-saving lifestyle.

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Upcoming Chapter Meeting: AAII Chicago

Posted on June 8, 2013 | Local Chapters

Date: Saturday, June 15, 2013
Topic: Trading Options on ETFs
Speaker: Jim Bittman, Director of Program Development, Chicago Board Options Exchange

In this presentation, Jim Bittman will discuss the merits, advantages and strategies for trading options on exchange-traded funds (ETFs).

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Upcoming Chapter Meeting: AAII Los Angeles

Posted on June 8, 2013 | Local Chapters

Date: Saturday, June 15, 2013
Topic: Our Behavioral and Cognitive Biases and How They Impact Our Investment Decisions
Speaker: Bob Seawright, Chief Investment & Information Officer, Madison Avenue Securities

We like to think we’re judges of a sort, carefully weighing the alternatives and possibilities before reaching a just and true verdict. Instead, we’re much more like lawyers, looking for anything, true or not, that we think might help to make our case and looking for ways to suppress that which hurts it. Bob’s presentation will examine the behavioral and cognitive biases that make decision-making so difficult for us and will suggest some ways for fighting these biases in investing and in life generally.

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DIVIDEND INVESTING ALERT FOR THE WEEK ENDING

Posted on June 7, 2013 | Dividend Investing

The headline of our May 3, 2013, weekly update was “Rates Stay Low.” The headline for this week’s update could have easily been “When Will the Fed Raise Rates?”

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