AAII Sentiment Survey: Optimism Stays Above 40%, Pessimism Stays Unusually Low

Posted on July 18, 2013 | AAII Survey

The percentage of individual investors describing their short-term outlook as optimistic stayed above 40% for the third consecutive week in the latest AAII Sentiment Survey. Meanwhile, the percentage holding a pessimistic outlook stayed at an unusually low level.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.2 percentage points to 47.7%. This is the first time optimism has been above 40% for at least three consecutive weeks since February 21, 2013. The historical average is 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, declined 1.8 percentage points to 31.0%. Though neutral sentiment has declined for three consecutive weeks, it is above its historical average of 30.5% for the eighth consecutive week and the 14th out of the past 17 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 3.0 percentage points to 21.3%. This is the fourth time in five weeks that pessimism has been below its historical average of 30.5%.

Bearish sentiment remains at an unusually low level (-1 standard deviation is a reading at or below 21.8%). Since 1987, there has been a slight underperformance for the S&P 500 when bearish sentiment has been similar levels: a median six-month return for the S&P 500 of 4.5% versus 4.7% for all periods.

The recent optimistic stance comes as stocks have rebounded off of their June lows and are approaching record highs. Some AAII members are encouraged by signs of continued economic growth and the length of the current rally. Others, however, are concerned about prevailing valuations, the slow pace of economic growth, interest rate uncertainty and a lack of progress on key issues by Washington politicians.

This week’s special question asked AAII members for their opinion about how clearly the Federal Reserve is communicating its intentions for monetary stimulus. Respondents were split with 45% saying the central bank is being clear and 33% saying the Fed is not being clear. Some individual investors said the central bank is stating its intentions, but traders and market commentators are creating confusion. Others thought the Fed is purposely muddying their message.

Here is sampling of the responses:

  • “I think the Fed has been quite clear. The market, however, seems to interpret the information differently.”
  • “The Fed is being clear, but the market speculators aren’t listening.”
  • “The Fed is being clear. You have to read what they say and not rely on all the talking head spin doctors.”
  • “It’s not clear to me because Fed officials couch their speeches in terms that may be interpreted in several different ways.”
  • “They are making it up as they go along. Their policy is as clear as mud.”

This week’s AAII Sentiment Survey results:

  • Bullish: 47.7%, down 1.2 percentage points
  • Neutral: 31.0%, down 1.8 percentage points
  • Bearish: 21.3%, up 3.0 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



Sell OF THE WEEK 7/17/2013

Posted on July 17, 2013 | Podcast

AAII Journal Editor Charles Rotblut Editor explains to Chuck Jaffe of MarketWatch why The Hershey Co (HSY) 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 7/16/2013

Posted on July 16, 2013 | Podcast

AAII Journal Editor Charles Rotblut Editor explains to Chuck Jaffe of MarketWatch why Chicos FAS (CHS) 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 July 2013 passing company lists and performance data is now available on-line

Posted on July 15, 2013 | Stock Screens

YTD Return of Top Performers: Piotroski: High F-Score 89.3% — O’Shaughnessy: Tiny Titans 35.6%

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July 2013 AAII Model Portfolios Updated

Posted on July 15, 2013 | Model Portfolios

1-Year Returns as of 6/30/13: AAII Fund Portfolio 20.1% — AAII Shadow Stock Portfolio 63.3%

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Upcoming Chapter Meeting: AAII Orange County

Posted on July 13, 2013 | Local Chapters

Date: Saturday, July 20, 2013
Topic: Portfolio Risk Reduction by the Proper Introduction of Real Estate
Speaker: Tim Mulrenan, President, Terravest Inc.

This presentation will discuss the impact of adding real estate to an investment portfolio, analyzing the different ways investors look at real estate compared to stocks or bonds, and review alternative vehicles for adding real estate to a portfolio to manage overall risk.

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Upcoming Chapter Meeting: AAII Los Angeles

Posted on July 13, 2013 | Local Chapters

Date: Saturday, July 20, 2013
Topic: The Talk: Getting Prepared for the Inevitable
Speaker: Terry Woods, President, ABCAlwaysBetterCare

At some point, either a loved one or you will need help both taking care of yourself and/or managing your financial affairs. How can you prepare for the inevitable? What are your choices for taking care of your physical and health needs? Who will handle your financial affairs? What if you suddenly needed help, would your family know your preferences? What types of care are available? Could anyone else write a check to pay the electric bill? It’s time to think about the unthinkable.

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Upcoming Chapter Meeting: AAII Washington D.C. Metro

Posted on July 13, 2013 | Local Chapters

Date: Saturday, July 20, 2013
Topic: Energy and Income: Still Your Best Bet for High Yield, Safety and Growth in an Aging Bull Market
Speaker: Roger S. Conrad, Co-Founder and Chief Editor, Capitalist Times

High yields are to this market what technology stocks were to the 1990s, and the trend is likely to end badly for many investors. Tied to the emerging Great American Energy Boom, high-yield energy is the exception. This presentation reveals the best buys across a range of sectors, from recession-proof utilities and still undiscovered pipeline companies to trusts that give you a share of the take from actual wells. Conrad also shows what to avoid, and how to take advantage of increased volatility due to surging institutional investment.

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Upcoming Chapter Meeting: AAII San Francisco

Posted on July 13, 2013 | Local Chapters

Date: Saturday, July 20, 2013
Topic: Time to Be Offensive, Defensive or Both?
Speaker: Kenneth G. Winans, President and Founder, Winans Investments

Several time-tested technical indicators will be shown to be useful tools in both market and investment research because they can be used to identify the direction of current investment trends, as well as early changes in the market conditions of stocks, REITs, bonds and commodities. Ken Winans will provide an overview on the performance of common stocks, preferred stocks, real estate and corporate bonds since 1900, and examine the best and worst bear markets during this period. Learn how to use Ken’s practical, time-tested financial navigation tools to detect early changes in investment trends, and how awareness of financial history is an important tool in your investing.

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DIVIDEND INVESTING ALERT FOR THE WEEK ENDING

Posted on July 12, 2013 | Dividend Investing

No changes were made to the portfolio this month because, as we explain in the report, we did not find a stock attractive enough to warrant making a change.

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