Investors Largely Comfortable With Current Valuations

Posted on December 18, 2014 | AAII Survey

This week’s Sentiment Survey special question asked AAII members how comfortable they are with the current valuations of the stocks they hold in their portfolios. Slightly less than one-third (31%) said they are comfortable with current valuations. A few clarified their responses by saying they are comfortable exclusive of oil stocks. Nearly 14% described themselves as being very comfortable. At the other end of the spectrum, 17% said they are not comfortable and an additional 7% said they are somewhat uncomfortable.

Here is a sampling of the responses:

  • “Not counting the energy sector, I am very comfortable.”
  • “Just fine; the dividend flow is more important than the daily price of the stocks.”
  • “Great. I am buying stocks on the dips.”
  • “Most of the stocks I hold are fairly valued. None are overvalued, but by my estimates, only one is undervalued.”
  • “They’re high, except for oil, so I’m worried.”

 



Neutral Sentiment Rises to Highest Level Since September

Posted on December 18, 2014 | AAII Survey

Expectations among individual investors for a flat market rose to its highest level since September in the latest AAII Sentiment Survey. Pessimism also rose, reaching a nine-week high, while optimism fell below its historical average.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell by 6.3 percentage points to 38.7%. Optimism was last lower on October 2, 2014 (35.4%). The drop ends a streak of 10 consecutive weeks with bullish sentiment above its historical average of 39.0%. This had been the longest such streak in nearly three years.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.7 percentage points to 34.4%. Neutral sentiment was last higher on September 18, 2014 (34.8%). This is the third 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, jumped by 4.5 percentage points to 26.9%. This is the highest level of pessimism since October 16, 2014 (33.7%). The increase was not large enough to keep bearish sentiment below its historical average of 30.5% for the ninth consecutive week and the 42nd week this year, however.

Neutral sentiment has risen by a cumulative 7.3 percentage points over the past three weeks. At the same time, bullish sentiment has declined by a cumulative 13.5 percentage points. The shift in expectations occurred as the S&P 500 underwent what was essentially a pullback. The large-cap index fell 4.9% between December 5 and December 16, 2014.

Keeping individual investors optimistic is falling energy prices, the overall upward momentum in stock prices, earnings growth, the Federal Reserve’s ending of its bond purchasing program and sustained economic expansion. Keeping other AAII members cautious are geopolitical events, weakness in energy stocks, a sense that prevailing valuations for other stocks are too high, the pace of economic growth and worries that a larger drop in stock prices is forthcoming.

This week’s AAII Sentiment Survey results:

  • Bullish: 38.7%, down 6.3 percentage points
  • Neutral: 34.4%, up 1.7 percentage points
  • Bearish: 26.9%, up 4.5 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.



Members Show Mixed Feelings on Oil and Energy Stocks

Posted on December 11, 2014 | AAII Survey

This week’s AAII Sentiment Survey special question asked AAII members for their opinion about how attractive oil and natural gas stocks are right now. Respondents largely fell into one of three groups. Slightly more than one third (34%) think the recent drop presents a buying opportunity. Many of these respondents said energy stocks are attractively valued right now, especially from a long-term perspective. Nearly 29% of respondents are pessimistic, with many thinking that prices could fall even further. About 16% are waiting for oil prices to stabilize or fall further.

Here is a sampling of the responses:

  • “Valuations are inexpensive and downside risk, though still a factor, has been somewhat reduced.”
  • “I think the price will continue to decline for the next few months.”
  • “Attractive for the long term; not so sure about the near term.”
  • “Good, but I’m waiting to invest. Prices may go lower…”
  • “Never catch a falling knife! I think we have a way to go to hit bottom.”
  • “If there were years left to my investing future, I would be a buyer.”


AAII Sentiment Survey: Bullish Sentiment Continues to Stay Above 40%

Posted on December 11, 2014 | AAII Survey

Optimism rebounded among individual investors in the latest AAII Sentiment Survey, extending the current streak of above-average bullish sentiment readings. Neutral sentiment also rose, while bearish sentiment declined.

Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded by 2.3 percentage points to 45.0%. The rise puts bullish sentiment above 40% for the ninth consecutive week and above its historical average of 39.0% for the 17th out of the past 18 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, edged up 1.3 percentage points to 32.6%. The rise keeps neutral sentiment above its historical average of 30.5% for the second consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 3.6 percentage points to 22.3%. The decline keeps pessimism below its historical average of 30.5% for the eight consecutive week and the 41st week this year.

The current streak of 10 consecutive weeks with bullish sentiment above its historical average is the longest such streak since early 2012. Optimism stayed above its historical average for a 14-week period running from December 29, 2011 through March 29, 2012.

Keeping individual investors optimistic is the overall upward momentum in stock prices, earnings growth, the Federal Reserve’s ending of its bond purchasing program, falling energy prices and sustained economic expansion. Keeping other AAII members cautious are geopolitical events, a sense that prevailing valuations are too high, the pace of economic growth and worries that a larger drop in stock prices is forthcoming.

This week’s AAII Sentiment Survey results:

  • Bullish: 45.0%, up 2.3 percentage points
  • Neutral: 32.6%, up 1.3 percentage points
  • Bearish: 22.3%, down 3.6 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.



Third-Quarter Earnings Make Little Impact on Investor Attitudes

Posted on December 4, 2014 | AAII Survey

This week’s Sentiment Survey special question asked AAII members whether their six-month outlook for stock prices has been impacted by third-quarter earnings. Nearly 19% said third-quarter earnings gave them reason to stay bullish or become more optimistic. Earnings growth and economic growth were the primary reasons given as to why. An equal number of respondents said third-quarter earnings had no impact on their outlooks. Several of these members said this was because they have a long-term focus. About 27% of respondents said other factors—including global monetary policy, politics and prevailing valuations—matter more.

Here is a sampling of the responses:

  • “Earnings are continuing to grow and price-earnings ratios are reasonable; therefore, stocks should have room to grow.”
  • “Earnings have been better than I expected, so I think we will continue to see upward movement in the stock market.”
  • “Earnings have not affected my outlook. It’s the global economic slowdown that concerns me.”
  • “I think longer-term than quarter-to-quarter earnings.”


AAII Sentiment Survey: Despite Big Drop, Optimism Stays Above Average

Posted on December 4, 2014 | AAII Survey

After being at unusually high levels for three out of the past four weeks, the level of optimism among individual investors fell by the largest weekly amount since June 18, 2014 (9.5 percentage points). However, because optimism was at such high levels, bullish sentiment remains above its historical average. Meanwhile, pessimism continues to be below average despite a rebound in bearish sentiment.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 9.5 percentage points to 42.7%. This is a seven-week low. Even with the decline, bullish sentiment remains above 40% for the eighth consecutive week and above its historical average of 39.0% for the 16th out of the past 17 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 4.3 percentage points to 31.4%. The rise puts neutral sentiment above its historical average of 30.5% for the first time in four weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 5.1 percentage points to 25.9%. The level of pessimism registered by our survey was last higher on October 16, 2014 (33.7%). Even with this week’s rise, bearish sentiment remains below its historical average of 30.5% for the seventh consecutive week and the 40th week this year.

Prior to this week’s reading, bullish sentiment had largely been at unusually high levels. Optimism exceeded 50% during three out of the past four weeks. Accompanying the swing back toward the historical average was short-term weakness in large-cap stocks prior to yesterday’s new high for the S&P 500 index.

Keeping individual investors optimistic is the overall upward momentum in stock prices, earnings growth, the Federal Reserve’s ending of its bond purchasing program, falling energy prices and sustained economic expansion. Keeping other AAII members cautious are geopolitical events, a sense that prevailing valuations are too high, the pace of economic growth and worries that a larger drop in stock prices is forthcoming.

This week’s AAII Sentiment Survey results:

  • Bullish: 42.7%, down 9.5 percentage points
  • Neutral: 31.4%, up 4.3 percentage points
  • Bearish: 25.9%, up 5.1 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.



End of QE Makes Little Impact on Member Allocations

Posted on December 2, 2014 | AAII Survey

November’s Asset Allocation Survey special question asked AAII members how the coming end of the Federal Reserve’s bond-buying program influenced their thoughts about allocating to bonds or bond funds. More than half of all respondents (53%) said the announcement had no impact. An additional 14% said they do not own fixed-income investments or are avoiding them. Approximately 7% said they are not adding to their fixed-income allocations or are reducing their allocations. Roughly 6% said they may either buy bonds or bond funds or are prepared to do so if interest rates rise.

Here is a sampling of the responses:

  • “No effect whatsoever. I keep a short five-year ladder of Treasury notes only.”
  • “Not much impact. [The bond-buying program] was unlikely to continue too much longer and I think that the market realized that.”
  • “Will not invest in bonds. Rising interest rates = lower bond prices.”
  • “Expected [the bond-buying program to end] for the last year, so had little effect as I’m already in short- to medium-term funds.”
  • “I will continue to stay light in bonds. Returns are just not that terrific.”
  • “I may take advantage of buying opportunities in the coming years as prices fall and yields rise as I tend to hold to maturity.”


November AAII Asset Allocation Survey: Equity Allocations Rebound

Posted on December 2, 2014 | AAII Survey

Individual investors’ allocations to equities rebounded for the first time in three months, according to the November AAII Asset Allocation Survey. The rise occurred as both fixed-income and cash allocations declined.

Stock and stock fund allocations rose 3.1 percentage points to 67.2%. This is the largest allocation since August 2014 (67.3%). The increase puts stock and stock fund allocations at or above their historical average of 60% for the 20th consecutive month and the 22nd out of the past 23 months.

Bond and bond fund allocations declined 1.2 percentage points to 16.0%. Fixed-income allocations were last lower in May 2014 (15.5%). Last month was the fourth consecutive month with fixed-income allocations above their historical average of 16%.

Cash allocations declined 1.9 percentage points to 16.8%. November was the 36th consecutive month with cash allocations below their historical average of 24%.

The rise in equity allocations occurred as individual investors were optimistic about the short-term direction of stock prices. Bullish sentiment in our weekly sentiment survey was above 50% during three out of the four weeks measured last month. At the same time, large-cap stocks continued to reach new highs. Plus, many AAII members continue to be frustrated by low bond yields and low interest rates on money market accounts.

November AAII Asset Allocation Survey results:

  • Stocks and Stock Funds: 67.2%, up 3.1 percentage points
  • Bonds and Bond Funds: 16.0%, down 1.2 percentage points
  • Cash: 16.8%, down 1.9 percentage points

November AAII Asset Allocation Survey details:

  • Stocks: 31.7%, up 1.5 percentage points
  • Stock Funds: 35.5%, up 1.6 percentage points
  • Bonds: 3.5%, down 0.4 percentage points
  • Bond Funds: 12.5%, down 0.8 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.



Investors Believe Consumers Faring Better This Year

Posted on November 20, 2014 | AAII Survey

This week’s Sentiment Survey special question asked AAII members how they think the average consumer is faring relative to a year ago. Slightly more than half of respondents (53%) said the average consumer is doing better, though many of them described the consumer as only doing somewhat or a little better. Gas prices were the top reason given as to why, though several respondents mentioned employment and/or economic growth. Roughly the same number of respondents (about 15% each) said the average consumer is faring about the same as last year or is faring worse. Though the decline in gas prices are viewed as a positive, stagnant wage growth and inflation in other areas were cited as headwinds.

Here is a sampling of the responses:

  • “Better. The economy is improving and oil prices are falling.”
  • “Better in part to more employment, falling heating and driving costs and the housing recovery.”
  • “Somewhat better due to lower unemployment, modest wage gains in some areas and lower fuel prices.”
  • “May be helped by lower gasoline prices, but is also facing rising food and housing prices.”
  • “Not much better. Job growth, and, more importantly, income growth has been slow.”


AAII Sentiment Survey: Optimism Drops Below 50%

Posted on November 20, 2014 | AAII Survey

Optimism pulled back from a four-year high, falling below 50% for the first time this month in the latest AAII Sentiment Survey. Neutral sentiment rebounded and pessimism rose for the second consecutive week.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 8.8 percentage points to 49.1%. The drop puts optimism at a five-week low. Nonetheless, bullish sentiment remains above its historical average of 39.0% for the seventh consecutive week and the 14th out of the past 15 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 4.3 percentage points to 27.1%. Even with the increase, neutral sentiment remains below its historical average of 30.5% for the seventh time in the past nine weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 4.5 percentage points to 23.8%. The rise was not large enough, however, to prevent pessimism from being below its historical average of 30.5% for the fifth consecutive week and the 38th week this year.

Seeing a bit of reversion to the mean is not unexpected given how high optimism was last week (57.9%, the 58th-highest reading in the survey’s history) and how low pessimism was on November 6, 2014 (15.1%, a nine-year low). Optimism remains at a very high level this week, however. Bullish sentiment is right at the border between what is typical and what is unusually high. Viewed in another manner, optimism is above 49% and pessimism is below 25% for the fifth consecutive week.

The sustained high level of optimism is occurring as the S&P 500 has risen by 10% since hitting a 2014 closing low on October 15. In addition to the avoidance of a correction and the strong rebound in equity prices, individual investors are also encouraged by falling energy prices, earnings growth, the Federal Reserve’s ending of its bond purchasing program and sustained economic expansion. Some AAII members may also be reacting to the outcome of the midterm elections. Keeping other AAII members cautious are geopolitical events, a sense that prevailing valuations are too high and the pace of economic growth.

This week’s AAII Sentiment Survey results:

  • Bullish: 49.1%, down 8.8 percentage points
  • Neutral: 27.1%, up 4.3 percentage points
  • Bearish: 23.8%, up 4.5 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.



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