AAII Sentiment Survey: 9-Year High for Neutral Sentiment

Posted on March 27, 2014 | AAII Survey

Neutral sentiment jumped its highest level since 2005 in the latest AAII Sentiment Survey. Optimism fell and pessimism rose to levels not seen since early February.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 5.6 percentage points to 31.2%. Optimism was last lower on February 6, 2014. It is also the second consecutive week with a bullish sentiment reading below its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, rose 3.2 percentage points to 40.2%. This is the highest level of neutral sentiment since April 14, 2005. It is also the 12th consecutive week with neutral sentiment above its historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 2.5 percentage points to 28.6%. This is the highest pessimism has been since February 6, 2014. Even with the increase, bearish sentiment remains below its historical average of 30.5% for the seventh consecutive week and the 25th time in 29 weeks.

Neutral sentiment is now at an unusually high level—more than one standard deviation above its historical average. There have only been 174 weeks with higher readings, and just 13 of those have occurred after January 1, 2000.

Bullish sentiment has fallen by a cumulative 10.1 percentage points during the past two weeks. Even with this steep drop, optimism remains within its typical range (within one standard deviation of the historical average). The recent decline in stock prices appears to continue be moving investors from the bullish camp into the neutral camp. It is important to note, however, that bearish sentiment is only two percentage points higher than where it was at the start of this month.

Keeping some AAII members encouraged is the overall upward momentum of stock prices, earnings growth, economic expansion, the Federal Reserve’s tapering of bond purchases and low interest rates. Other AAII members are fretting about elevated stock valuations, the pace of revenue growth, the slow rate of economic expansion and Washington politics.

This week’s special question asked AAII members how much leeway they are willing to give companies for blaming first-quarter weakness on the winter weather. Half of all respondents said they weren’t going to give any leeway or only very little. Approximately 21% said the answer depends on the company or the industry, while another 21% said they are willing to give companies some or a little leeway. Fewer than 8% of all respondents are willing to give companies a lot of leeway to blame the first quarter’s winter storms.

Here is a sampling of the responses:

  • “You can only blame the weather for so long.”
  • “Very little and only with specific circumstances.”
  • “Not much leeway. Bad weather does have some effect, but bad weather occurs somewhere all the time.”
  • “I’m accepting that excuse for one quarter. Then, second quarter results have to be better.”
  • “Only when it pertains to companies that may be directly affected by the cold and snow.”
  • “Winter has been horrible for many of us, more so than in the past. I’ll give a lot of blame to the weather.”

This week’s AAII Sentiment Survey results:

  • Bullish: 31.2%, down 5.6 percentage points
  • Neutral: 40.2%, up 3.2 percentage points
  • Bearish: 28.6%, up 2.5 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.



Upcoming Chapter Meeting: AAII New York City

Posted on March 26, 2014 | Local Chapters


Date: Wednesday, April 2, 2014
Topic: The Great Stock-Bond Rotation Revisited

Speaker: Nicholas P. Sargen, Chief Investment Officer, Fort Washington Investment Advisors Inc.

Our speaker, Nicholas Sargen, believes that U.S. stocks will continue to outperform both bonds and emerging markets as they did in 2013. However, the gap in performance will be considerably smaller, as U.S. equity valuations are no longer cheap and the market is pricing in favorable news for the U.S. and global economy. The main risk for U.S. equities is that the Federal Reserve may not be able to wind down its quantitative easing program successfully.

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Tax Preparation Services

Posted on March 26, 2014 | Computerized Investing

Computerized_Investing

The year 2013 was great for the stock market, with each of our major indexes finishing up more than 25%. If you were one of the lucky (or unlucky, as the case may be) investors who managed to lock in gains in taxable accounts, you have capital gains taxes to look forward to. Whatever your situation, tax time can still be an arduous process. However, the rise of the Internet and computing power has made it easier than ever to do your own taxes quickly and affordably.

As usual around this time of year, Computerized Investing reviews some of the best tax preparation services. For many individual investors, these services are more than enough to assist in completing tax forms and filing them. These programs also offer various levels of service for investors in different situations.

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Sell OF THE WEEK 3/26/2014

Posted on March 26, 2014 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Lincoln Electric Holdings (LECO) 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 3/25/2014

Posted on March 25, 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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BUY OF THE WEEK 3/25/2014

Posted on March 25, 2014 | Podcast

AAII Journal Editor Charles Rotblut Editor explains to Chuck Jaffe of MarketWatch why Apple (AAPL) 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



STOCK SUPERSTARS ALERT FOR THE WEEK ENDING March 21, 2014

Posted on March 22, 2014 | Stock Superstars Report

Toward the beginning of the week investors shifted their focus to the Federal Reserve, which was a welcome change of pace from last week’s geopolitical drama.

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DIVIDEND INVESTING ALERT FOR THE WEEK ENDING 3/21/2014

Posted on March 22, 2014 | Dividend Investing

Federal Reserve Chair Janet Yellen rattled trader’s nerves on Wednesday afternoon. Some context is needed before we share what she said.

The Federal Open Market Committee (FOMC) revised its guidance on when it might start to raise interest rates.

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Coping with Randomness

Posted on March 20, 2014 | Investor Update

Investor-Update

I found myself struggling with my NCAA Basketball Tournament picks more this year than in the past. Partially it’s because of the parity that has evolved in men’s college basketball. Partially it’s because there are teams whose chances are tough to assess (e.g. North Carolina, Michigan State, my Kansas Jayhawks, etc.). Then there is the sheer randomness of the event that wrecks bracket picks.

The statistical odds of the tournament favor going with the top-ranked seeds, but upsets can and do happen. Fourth-seeded teams have lost during the first full round of play (now technically the second round of the tournament) more than 20% of the time since 1985. Seventh-seeded teams face nearly a 40% chance of not making it to the round of 32. Top-seeded teams may look invincible with a perfect record during the round of 64, but it’s only a matter of time one is beaten by a 16th seed. (For those of you who don’t follow college basketball, the NCAA tournament has seven single-elimination rounds, whittling a field of 68 teams to just two.)

As the tournament goes on, unexpected teams gain momentum and win more games than anyone predicted. Wichita State, Butler, VCU and George Mason all surprised expectations and busted tournament brackets by making it to the Final Four in past years. I don’t recall any of the major college basketball commentators advising to take a chance on any of those teams. (This year, Wichita State is a #1 seed and is certainly not an underdog. The Las Vegas Sun listed the school’s odds of winning the national championship as 4-to-1.)

No amount of analysis can help you pick the correct outcome of every game. This is why Quicken Loans is able to run a contest with a $1 billion prize; the chances of picking a perfect bracket are astronomical. USA Today cited DePaul University mathematician Jeff Bergen as calculating the odds to be one in 9,223,372,036,854,775,808. Yet many have scrutinized their picks this week, including myself, in hopes of getting them right. It’s a reflection of our inability to cope with random events.

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AAII Sentiment Survey: Optimism Declines to a Six-Week Low

Posted on March 20, 2014 | AAII Survey

Optimism fell to a six-week low as expectations for a flat market rebounded in the latest AAII Sentiment Survey. Pessimism stayed below average for the sixth consecutive week.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 4.6 percentage points to 36.8%. This is the lowest level of optimism recorded by our survey since February 6, 2014. It also ends a streak of five consecutive weeks with bullish sentiment above its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, rose 5.2 percentage points to 37.1%. This is the 11th consecutive week with neutral sentiment above its historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined by 0.7 percentage points to 26.1%. Pessimism is below its historical average of 30.5% for the 24th time in 28 weeks.

The decline in bullish sentiment is not significant, especially when one considers that the level of optimism remains close to its historical average. Weakness in the stock market over the survey period may have moved some investors from the bullish camp and into the neutral camp. Bearish sentiment has not moved much over the past three weeks, fluctuating within a 0.7 percentage point range.

Many AAII members are encouraged by the overall upward momentum of stock prices, earnings growth, economic expansion, the Federal Reserve’s tapering of bond purchases and low interest rates. Some AAII members are fretting about elevated stock valuations, the pace of revenue growth, the slow rate of economic expansion and Washington politics.

This week’s special question asked AAII members if the Federal Reserve should keep, get rid of or adjust its 6.5% unemployment rate target. Respondents were mixed with 39% voting to get rid of the target, 22% saying it should be adjusted and 21% wanting to keep it unchanged. Those who wanted to keep the target unchanged thought the economy is not strong enough or worried about a negative market reaction. Those who wanted to adjust it suggested either lowering the target rate or having it encompass other employment measures. Those who want to get rid of it didn’t think the target was contributing to job growth or that the Federal Reserve should be focused on job growth. (Nearly all of the responses were given before the fixed target was rescinded in yesterday’s Federal Open Market Committee meeting statement.)

Many AAII members questioned the validity of the unemployment rate as an accurate measure of the health of the job market. This skepticism existed regardless if a respondent thought the target should be kept, adjusted or removed.

Here is a sampling of the responses:

  • “Keep! The 6.5% rate seems to be working satisfactorily. No boat rocking please.”
  • “Adjust. The target is too high. There will always be many more unemployed than appear in the numbers.”
  • “Get rid of it. The Federal Reserve cannot significantly affect the unemployment rate.”
  • “Get rid of the target since the federal government is not providing a full or true unemployment picture.”
  • “I think 6.5% is deceiving. There are many people who have just given up and are no longer looking for work.”

This week’s AAII Sentiment Survey results:

  • Bullish: 36.8%, down 4.6 percentage points
  • Neutral: 37.1%, up 5.2 percentage points
  • Bearish: 26.1%, down 0.7 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



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