AAII Members Weigh In on NASDAQ Rise

Posted on April 23, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members what they thought about the NASDAQ rising above 5,000 for the first time since 2000. About 11% of respondents said it was basically a non-event, with some describing the move as not revealing anything about the market’s current valuation. Nearly 8% said reaching 5,000 was a positive. Six percent thought it was about time the NASDAQ returned to 5,000. Another 6% of said it will either be difficult for the NASDAQ to stay at this level or that reaching 5,000 is otherwise a reason for concern that the market is getting overpriced. A little more than 3% of respondents view valuations as being cheaper now than they were during the technology bubble.

Here is a sampling of the responses:

  • “It’s about time. This time seems much more sustainable than last time.”
  • “I really don’t think it was that significant.”
  • “P/E ratios are realistic now, especially when compared to the rapid ascent to 5,000 in 2000.”
  • “It’s been up for a long time. It’s time for a drop in the market.”
  • “Would like it better if the value of money hadn’t declined over the last 15 years.”
  • “A good thing.”


Neutral Sentiment Stays Above 45% for a Third Week

Posted on April 23, 2015 | AAII Survey

Neutral sentiment is above 45% for a third consecutive week, the longest such streak since 1989. Optimism declined slightly, while pessimism rose slightly.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 0.6 percentage points to 31.5%. The modest drop keeps optimism below its historical average of 39.0% for a seventh consecutive week. The last time optimism stayed below average for a longer period of time was an eight-week stretch between June 19, 2014 and August 7, 2014.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, edged up 0.2 percentage points to 45.3%. This week’s rise keeps neutral sentiment above its historical average of 30.5% for the 16th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 0.4 percentage points to 23.2%. The historical average is 30.5%.

There are two observations to make regarding neutral sentiment. First, this is the longest streak with neutral sentiment at or above 45% since a four-week stretch between December 16, 1988 and January 6, 1989. (Neutral sentiment fluctuated between 46% and 54% over that span.) Second, since the start of 2014, neutral sentiment has been above its historical average of 30.5% on 56 out of 69 weeks.

Historically, unusually high levels of neutral sentiment have been correlated with better-than-average market performance over the following six- and 12-month periods. (See Analyzing the AAII Sentiment Survey Without Hindsight in the June 2014 AAII Journal for more information.) There is no guarantee history will repeat in the future, however.

Keeping some AAII members encouraged are the ongoing bull market, sustained economic expansion, earnings growth and still-accommodative monetary policy. Causing other AAII members to be cautious or pessimistic are prevailing valuations, recent price volatility, geopolitical events, the pace of economic growth, the impact of the stronger dollar in earnings growth and worries that a notable decline in stock prices could occur.

This week’s AAII Sentiment Survey results:

  • Bullish: 31.5%, down 0.6 percentage points
  • Neutral: 45.3%, up 0.2 percentage points
  • Bearish: 23.2%, up 0.4 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.



The Impact of Global Events on Market Outlook

Posted on April 16, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members what, if any, global events are influencing their six-month outlook towards the stock market. Responses varied, with several members listing more than one event. More than one in five (22%) respondents said that events in the Middle East are having an impact. Ongoing instability was the primary factor, though several respondents mentioned the framework for a possible deal with Iran. About 19% of respondents said that Europe is influencing their outlooks, particularly its rate of growth. The stronger U.S. dollar is influencing the outlooks of 15% of all respondents. A nearly equal number, about 11% each, said that the global economy and central bank policies are having an impact on their expectations for the stock market.

Here is a sampling of the responses:

  • “Economic stimulus measures overseas may help to offset a fully to slightly overvalued U.S. market.”
  • “Growing unrest in the Middle East.”
  • “Iranian nuclear accord reaching finalization.”
  • “The continuing strength of the U.S. dollar.”
  • “The European Union economy seems to be stabilizing thanks to accommodative monetary policy.”


AAII Sentiment Survey: Neutral Sentiment Above 45% for a Second Week

Posted on April 16, 2015 | AAII Survey

The proportion of individual investors describing their six-month outlook for stocks as neutral is above 45% for a second consecutive week for the first time in more than 26 years. Optimism rebounded back above 30%, while pessimism declined.

Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded by 3.4 percentage points to 32.1%. Even with the upward move, optimism is below its historical average of 39.0% for the sixth consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 2.0 percentage points to 45.1%. This is the first time neutral sentiment has stayed at or above 45% on consecutive weeks since January 20 and January 27, 1989. (Neutral sentiment was 47.0% and 49.0%, respectively, on those dates.) This week is the 15th 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 1.4 percentage points to 22.8%. This drop puts bearish sentiment at a seven-week low. The historical average is 30.5%.

Seeing neutral sentiment stay at or above 45% is very unusual, though it did it reach and hold even higher levels throughout 1988. Historically, unusually high levels of neutral sentiment have been correlated with better-than-average market performance over the following six- and 12-month periods. (See Analyzing the AAII Sentiment Survey Without Hindsight in the June 2014 AAII Journal for more information.) There is no guarantee history will repeat in the future, however.

Keeping some AAII members encouraged is the ongoing bull market, sustained economic expansion, earnings growth and still-accommodative monetary policy. Causing other AAII members to be cautious or pessimistic are prevailing valuations, recent price volatility, geopolitical events, the pace of economic growth, the impact of the stronger dollar in earnings growth and worries that a notable decline in stock prices could occur.

This week’s AAII Sentiment Survey results:

  • Bullish: 32.1%, up 3.4 percentage points
  • Neutral: 45.1%, down 2.0 percentage points
  • Bearish: 22.8%, down 1.4 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.



Members Weigh In on the State of the Average Consumer

Posted on April 9, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members how they think the average consumer is faring relative to one year ago. Responses were mixed. Slightly less than a quarter of all respondents (24%) said the average consumer is doing better, primarily because of lower gasoline prices and an improved labor market. About 19% described the average consumer as faring somewhat/slightly better thanks to lower gasoline prices and improved labor market conditions. Roughly 21% said the average consumer is faring about the same, with the lack of wage growth as the most common reason. Nearly 18% of respondents said the average consumer is faring worse due to higher prices (excluding gasoline) and a lack of wage growth.

Here is a sampling of the responses:

  • “I think consumers are doing better due to more people being employed and the lower cost of gasoline.”
  • “Slightly better because of the improved job market and the reduction in gas prices.”
  • “Less well. Food prices, insurance costs, everything but gasoline is up; wages are flat or are up much less than costs are.”
  • “Not much better with stagnant wages and continued underemployment.”


AAII Sentiment Survey: Neutral Sentiment Spikes to a 12-Year High

Posted on April 9, 2015 | AAII Survey, Investing

Neutral sentiment spiked to a 12-year high in the latest AAII Sentiment Survey. The percentages of individual investors describing themselves either bullish or bearish fell.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 6.7 percentage points to 28.7%. This is a three-week low. The drop puts optimism below its historical average of 39.0% for the fifth consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, surged by 14.5 percentage points to 47.2%. Neutral sentiment was last higher on February 6, 2003 (51.4%). This week’s jump puts neutral sentiment above its historical average of 30.5% for the 14th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, pulled back by 7.8 percentage points to 24.1%. The historical average is 30.5%.

Not only is neutral sentiment at an unusually high level, it is at an unusually high level for the third time in five weeks. Historically, unusually high levels of neutral sentiment have been correlated with better-than-average market performance over the following six- and 12-month periods. (See Analyzing the AAII Sentiment Survey Without Hindsight in the June 2014 AAII Journal for more information.) There is no guarantee history will repeat in the future, however.

During the past five weeks, there have been notable swings in all three sentiment indicators. Bullish sentiment has fluctuated within a 10-percentage-point range, neutral sentiment has moved within a 14.5-percentage-point range and bearish sentiment has swung within nearly an eight-percentage-point range. The up and down movements have occurred as stock prices have been more volatile, the odds of an interest rate hike occurring sooner rather than later have increased and projections for first-quarter earnings have been reduced.

Keeping some AAII members encouraged is the ongoing bull market, sustained economic expansion, earnings growth and still-accommodative monetary policy. Causing other AAII members to be cautious or pessimistic are prevailing valuations, disappointing earnings or guidance from certain companies, geopolitical events, the pace of economic growth and worries that an even larger decline in stock prices could occur.

This week’s AAII Sentiment Survey results:

  • Bullish: 28.7%, down 6.7 percentage points
  • Neutral: 47.2%, up 14.5 percentage points
  • Bearish: 24.1%, down 7.8 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.



Investors’ Six-Month Equity Outlook Growing Cautious

Posted on April 2, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members how, and why, their six-month outlook for stocks has evolved since the start of the year. Nearly 44% said they have either turned more cautious or are otherwise currently cautious. Elevated valuations and a general sense that the market is due for a larger drop of a correction were the primary reasons why. Other respondents cited the possibility of a forthcoming rate hike as the reason for their more cautious stance.

More than a quarter of all respondents (26%) said their outlook has not changed, while 18% said they are more optimistic. Sustained economic growth was the primary reason given by those whose outlooks are more upbeat.

Here is a sampling of the responses:

  • “Gone from bullish to neutral largely due to the pending increase of interest rates by the Fed.”
  • “Remain bullish because the U.S. economy is improving.”
  • “My guess is that the market is overdue for a 10% to 20% correction.”
  • “Valuation for stocks seems to be on the high side.”
  • “Slow, but sustained, economic growth and low interest rates continue to make for a positive market.”


AAII Sentiment Survey: Pessimism Jumps to a Two-Month High

Posted on April 2, 2015 | AAII Survey, Investing

Pessimism about the short-term direction of stock prices rose to a two-month high in the latest AAII Sentiment Survey. AAII members grew more cautious overall, as fewer members anticipated price increases or flat markets over the next six months. All three sentiment indicators are well within their typical historical ranges, however.

Bullish sentiment, expectations that stock prices will rise over the next six months, pulled back by 3.0 percentage points to 35.4%. The decline puts optimism below its historical average of 39.0% for the fourth consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 4.5 percentage points to 32.6%. This is an eight-week low. Even with the drop, neutral sentiment is above its historical average of 30.5% for the 13th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 7.6 percentage points to 32.0%. The rise puts pessimism at its highest level since February 5, 2015, and above its historical average of 30.5%.

The comparatively higher level of volatility in stock prices this year has contributed to notable swings in the sentiment readings. For example, neutral sentiment has fallen by a cumulative 10.4 percentage points over the past three weeks after rising to a 10-month high of 43.0% on March 12, 2015.

In addition to the recent price fluctuations, prevailing valuations, concerns about the market reaction to a potential forthcoming interest rate hike, worries that an even larger decline in stock prices could occur and the pace of economic growth are weighing on some AAII members’ short-term market outlook. Keeping other AAII members encouraged is sustained economic expansion, still-accommodative monetary policy, a lack of investment alternatives to stocks and the ongoing bull market.

This week’s AAII Sentiment Survey results:

  • Bullish: 35.4%, up 3.0 percentage points
  • Neutral: 32.6%, down 4.5 percentage points
  • Bearish: 23.0%, up 7.6 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.



Investors Weigh In on Past Allocation Mistakes

Posted on April 1, 2015 | AAII Survey

Last month’s Asset Allocation Survey special question asked AAII members about the biggest mistake they have made over the six-year course of the current bull market. We received a wide range of responses. Nearly 15% of respondents said that they did not hold a large enough allocation to stocks, and an additional 5% said they waited too long to buy stocks or boost their allocations. More than 8% said that they held onto too much cash. Allocating too much to bonds and bond funds was the mistake cited by 7% of respondents. About 15% said that they either invested in the wrong industry or sector (e.g. energy, gold mining, etc.) or failed to invest in the best-performing industries (e.g., biotech, health care).

Slightly more than 11% of respondents said they did not make any allocation mistakes. Many of these AAII members said they stuck to their long-term allocation strategies throughout the current bull market.



Equity Allocations Match 2007 Levels

Posted on April 1, 2015 | AAII Survey

Individual investors’ allocations to stocks and stock funds are now at levels last seen in June 2007, according to the March AAII Asset Allocation Survey. Bond and bond fund allocations rose slightly, while cash allocations declined.

Stock and stock fund allocations rose 0.3 percentage points to 68.6%, matching June 2007’s equity allocation. Stock and stock fund allocations have now been at or above their historical average of 60% for 24 consecutive months, and for 26 out of the past 27 months.

Bond and bond fund allocations increased by a nominal 0.1 percentage points to 16.5%. March was the 10th consecutive month with fixed-income allocations at or above their historical average of 16%.

Cash allocations fell 0.4 percentage points to 14.9%. March was the 40th consecutive month with cash allocations below their historical average of 24%.

Equity allocations are now at their third-highest level in the past 10 years. Only April 2006 (70.3%) and February 2007 (68.7%) had larger allocations. Larger equity allocations have been registered by our survey prior to 2006, with a record 77.0% allocation to stocks and stock funds occurring in January and March of 2000.

A combination of longer-term approaches to portfolio management and a lack of good alternatives may have contributed to the rise in equity allocations. From a return standpoint, the equity markets pulled back last month. Sentiment about the short-term direction of stock prices among our members largely stayed below average last month as well. Yields on the benchmark 10-year Treasury note fluctuated throughout March, ultimately ending down slightly.

March AAII Asset Allocation Survey results:

  • Stocks and Stock Funds: 68.6%, up 0.3 percentage points
  • Bonds and Bond Funds: 16.5%, down 0.1 percentage points
  • Cash: 14.9%, down 0.4 percentage points

March AAII Asset Allocation details:

  • Stocks: 32.8%, down 1.1 percentage points
  • Stock Funds: 35.8%, up 1.4 percentage points
  • Bonds: 3.9%, up 0.7 percentage points
  • Bond Funds: 12.6%, down 0.5 percentage points

Historical Averages:

  • Stocks/Stock Funds: 60%
  • Bonds/Bond Funds: 16%
  • Cash: 24%

*The numbers are rounded and may not add up to 100%.

The AAII Asset Allocation Survey has been conducted monthly since November 1987 and asks AAII members what percentage of their portfolios are allocated to stocks, stock funds, bonds, bond funds and cash. The survey and its results are available online at: http://www.aaii.com/investor-surveys.



Older Entries »