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AAII Survey: Readers Weigh in on New Year’s Rally, Outlook for Rest of Year

Stocks have been on quite a run since the start of 2018, fueled by strong earnings reports and data showing continued economic growth both at home and abroad. Through Friday’s close, the S&P 500 index has closed at a record high 14 times, which marks the most records for the index in a single month since June 1955 according to The Wall Street Journal.

Since the close on December 31, 2017, the S&P 500 has added 7.5% while the Dow Jones industrial average has climbed 7.7% and the Nasdaq composite has tacked on 8.7%. Volatility is creeping back into the market as well, as the CBOE Volatility Index (VIX) has risen nearly 13% since its low on January 10.

AAII Weekly Survey Question

Beyond strong corporate earnings and economic data, a number of other factors have been cited as contributors to the market’s early year rally. To see where our readers stand as to the driving force behind the year-to-date market gains, our latest weekly survey question asked:

What do you think is the primary force behind the strong stock market performance to start the new year?

Here are the results:

In all, 3,776 readers participated in the survey.

The top three vote-getters were grouped relatively close together, with Donald Trump garnering the most votes at 23%. In a close second, was the newly passed tax law at 22% and just a few votes behind that, also at 22%, was confidence in the U.S. economy.

Only 15% of voters believe the market’s recent gains are being driven by “irrational exuberance” or greed.

Weekly Special Question

The stock market rally to start the new year has already exceeded the gains some analysts had projected for all of 2018. To get an idea of whether the strong start for 2018 has changed our readers’ forecasts for the year, last week’s AAII special question asked:

How has the strong stock market performance to start the year changed your view on the market’s prospects for the rest of the year?

In all, we received 488 responses to the question.

Nearly 38% of respondents said that the recent run in the market has made them less optimistic about the market’s prospects for the rest of the year.

Almost 30% of responses said the market performance to start the year has only re-affirmed their previous forecasts or hasn’t changed how they believe the market will perform this year.

More than 28% of readers said the performance of the stock market to start the year has made them feel more optimistic about the market’s prospects for the rest of the year.

Here is a sampling of the reasons why our readers either do or don’t use a financial adviser:

  • “Worry that this is the ‘last hurrah’ for the bull market.”
  • “More confident that the indexes and my portfolio will be higher by the end of the year than at the end of 2017.”
  • “After 2017, I simply don’t have a view. I’ve never experienced a market like this.”
  • “The strong performance is only masking other weaknesses. The national debt continues to spiral upwards. Inflation is rampant as evident by the price of luncheon meat or seeing how little a Ben Franklin fills your grocery bag. Relatively few working class people are benefiting from the market increase while I have seen stories of large cities having problems with a multitude of homeless. Employment low—a bunch of crap. The market has gone up due to quantitative easing and when one bank says it is going to cut back another bank starts it. I believe a lot of people are going to find themselves on the short end of the stick when the market does correct.”
  • “The steps taken by the President to reduce burdensome regulations, left by the former executive who apparently hated the success of America and his tax cut package has greatly enhanced our economy.”
  • “Selling the rally. I hate taking long positions with these dream-like valuations.”
  • “It hasn’t changed my view a lot. I think we’ll see only average performance for the rest of the year.”
  • “It has scared me a lot. Waiting for a big correction in order to load up!”
  • “An old Wall Street axiom is how the first week of January goes, so goes the first month. And as the first month goes, so goes the year.”

Everybody has an opinion! Why not give us yours? Participate in our weekly member poll, updated every Monday, and see the results online at www.aaii.com/memberquestion.

 

 

 

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