AAII Survey: Recent Market Volatility Has Done Little to Change Investors’ Outlook

The last few weeks have offered an interesting ride for U.S. investors. The Dow Jones industrial average logged its two biggest single-day point drops. The Dow and S&P 500 index entered “correction” territory, both having fallen at least 10% (on an intraday basis) from their most recent highs. Yet, as of Friday’s close, the Dow is only 4.9% from its all-time high close set on January 26 and the S&P 500 is 4.4% away from its January high.

Given the roller coaster ride of the market this month, it’s not surprising that volatility has also seen its ups and downs. One common measure of volatility is the CBOE Volatility Index, or VIX. The VIX uses S&P 500 index (SPX) options activity to gauge investors’ expectations of volatility. According to data from Bloomberg, from 2000 to 2017, the average reading in the VIX was 19.88. Between the close on January 26—the last all-time-high close for the S&P 500—and the close on February 5, the VIX jumped from 11.08 to 37.32, a 237% increase. As of the close on February 23, the VIX stood at 16.49, which is 17% below its average since the start of 2000. It bears remembering that volatility was extremely low throughout 2017 and that recent activity has brought volatility back to more “normal” historical levels.

AAII Weekly Survey Question

With all that’s been going on with the market, we were curious to see what impact it has had on investors’ outlooks for the next 12 months. So last week’s survey question asked:

Compared to how you felt at the start of the year, how optimistic or pessimistic are you about your investments over the coming 12 months?

Here are the results:

In all, 2,573 readers participated in the survey.

The biggest block of voters—44%—said that the recent market volatility has done nothing to change their outlook for their investments for the next 12 months.

A little more than a third—34%—said that they are slightly more pessimistic about their investments over the next 12 months while 13% said they are slightly more optimistic about the prospects for their investments for the coming year.

Rounding out the voting, 5% of respondents said they are now much more pessimistic about their investments over the next 12 months and the remaining 3% say they are much more optimistic about their investments for the next year given the recent market behavior.

Weekly Special Question

To dive deeper into how the recent market activity has changed investors’ outlooks, last week’s special question asked:

How has your investing outlook for the next 12 months changed since the start of the year?

Overall, we received 289 responses to the question.

Most of the responses skewed towards investors becoming more negative or bearish (44%) or not changing their outlook for the next 12 months (43%). For this block of respondents, they are more bearish than those who participated in the weekly survey. However, only 16% specifically said their investment outlook has become more pessimistic over the next 12 months.

The biggest single block of voters—38%—said they have not changed their outlook for the next 12 months.

Another 13% of participants say they have become more conservative or cautious in the face of the recent market volatility.

Only 13% of respondents say they have a more positive investment outlook for the next 12 months, with nearly 29% of those voters saying they are waiting for a buying opportunity.

Here is a sampling of the responses readers offered regarding how their investment outlook for the next 12 months has changed:

  • “Absolutely! The advent of higher interest rates, I believe, will stifle the growth of stocks. I find it interesting that the tax cut proposed to fuel the economy will be the stimulus to bring on inflation and stifle its growth.”
  • “I am generally a buy and hold investor so I’ll stay the course.”
  • “It has not changed.”
  • “Much more cautious.”
  • “Taking profits after 2 years fully invested in the market.”
  • “Corrections are to be expected, and they are healthy for the market overall.”
  • “Now that we have had a correction, I am slightly more optimistic.”
  • “The “buy and hold” system is still working.”
  • “Less likely to commit new capital due to the volatile market. Might increase shares in current company stocks that I think are rock solid companies.”

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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