AAII Sentiment Survey: Optimism Falls to Lowest Level in a Year

Posted on April 17, 2014 | AAII Survey

Optimism among individual investors is now at levels not seen in 12 months, according to the latest AAII Sentiment Survey. Neutral sentiment, meanwhile, is above average for the 15th consecutive week.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 1.3 percentage points to 27.2%. Optimism was last lower on April 18, 2013. Bullish sentiment is also now 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, rebounded by 1.1 percentage points to 38.5%. This puts neutral sentiment above its historical average of 30.5% for the 15th consecutive week. The last time a similar streak occurred was in 1999.

Bearish sentiment, expectations that stock prices will fall over the next six months, edged up 0.1 percentage points to 34.3%. The modest increase puts pessimism at a 10-week high. It also puts bearish sentiment above its historical average of 30.5% on back-to-back weeks for the first time since January 30 and February 6, 2014.

Bullish sentiment is now at an unusually low level, or more than one standard deviation below its historical average. Historically, such readings have been a contrarian signal. Optimism can stay at below-average levels for a period of time, however. It is also important to realize that many AAII members are long-term investors and do not make portfolio decisions solely based on changes in their short-term expectations.

The drop in bullish sentiment comes as downward volatility has returned to the market. The recent decline in stock prices has heightened concerns that a market top has been formed and that valuations may have become too high. Also playing a role is the pace of revenue growth, the slow rate of economic expansion and Washington politics. Keeping some individual investors from being pessimistic is earnings growth, economic expansion, the Federal Reserve’s tapering of bond purchases and low interest rates.

This week’s special question asked AAII members what they think about the decline experienced by highly valued momentum stocks such as Netflix (NFLX) and Facebook (FB) since the start of March. About 60% of respondents said these stocks were overvalued and/or that they were not surprised to see the share prices fall. A small number of respondents (5%) thought the declines are a precursor to a further decline in the broad market indexes.

Here is a sampling of the responses:

  • “About time. They were way overpriced for their revenue models and long-term outlooks.”
  • “They were overvalued and are still overvalued!”
  • “They didn’t deserve their valuation and needed to be knocked down.”
  • “I am glad I did not buy into the hype or the noise.”

This week’s AAII Sentiment Survey results:

  • Bullish: 27.2%, down 1.3 percentage points
  • Neutral: 38.5%, up 1.1 percentage points
  • Bearish: 34.3%, up 0.1 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



AAII Sentiment Survey: Pessimism Jumps to a 9-Week High

Posted on April 10, 2014 | AAII Survey

Pessimism rose to a nine-week high in the latest AAII Sentiment Survey. Neutral sentiment stayed above average for the 14th consecutive week, while optimism remained below average.

Bullish sentiment, expectations that stock prices will rise over the next six months, plunged 6.9 percentage points to 28.5%. This is the lowest level of optimism registered by our survey since February 6, 2014 (27.9%). It is also the fourth consecutive week with bullish sentiment below its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 0.4 percentage points to 37.4%. Neutral sentiment is now above its historical average of 30.5% for the 14th consecutive week. This is the longest such streak since 1999 (15 weeks).

Bearish sentiment, expectations that stock prices will fall over the next six months, spiked 7.3 percentage points to 34.1%. This is the largest amount of pessimism since February 6, 2014 (36.4%). It also ends a streak of eight consecutive weeks with bearish sentiment below its historical average of 30.5%.

At current levels, bullish sentiment is right at the border of what we would consider to be a typical or an unusually low reading. The drop in optimism comes as the S&P 500 fell by 2.3% and the Nasdaq lost more than 3.7% over a two-day period.

Some AAII members are fretting about the possibility of a market pullback, elevated stock valuations, the pace of revenue growth, the slow rate of economic expansion and Washington politics. Others remain 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.

This week’s special question asked AAII members how much impact the events in Ukraine are having on their six-month outlook for stocks. Nearly two-thirds of respondents (63%) said the events were having no to very little impact on their outlook. About 11% said the events were having a little impact, while 9% said the events were having some impact. Just slightly more than 5% said the events were causing them to be more bearish.

Here is a sampling of the responses:

  • “None, unless Russia becomes more aggressive.”
  • “Minimal at most.”
  • “Not much, it’s just a disturbing and sad mess.”
  • “None at this time.”
  • “Some. Clearly it adds risk.”

This week’s AAII Sentiment Survey results:

  • Bullish: 28.5%, down 6.9 percentage points
  • Neutral: 37.4%, down 0.4 percentage points
  • Bearish: 34.1%, up 7.3 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



AAII Sentiment Survey: Neutral Sentiment above Average for 13th Week

Posted on April 3, 2014 | AAII Survey

The proportion of individual investors expecting stock prices to be essentially unchanged over the next six months continues to be above the historical average, according to the latest AAII Sentiment Survey. Optimism increased, while pessimism declined.

Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded by 4.2 percentage points to 35.4%. Even with the increase, optimism remains below its historical average of 39.0% for the third consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 2.4 percentage points to 37.9%. Neutral sentiment is now 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, declined 1.8 percentage points to 26.8%. This is the fourth time in five weeks that pessimism has stayed within a 0.7 percentage-point range. It is also the eighth consecutive week and the 26th time in 30 weeks with a bearish sentiment reading below the historical average of 30.5%.

The current streak of consecutive weeks with above-average neutral sentiment is the longest since 1999. Neutral sentiment stayed above its historical average for 15 consecutive weeks between July 29, 1999 and November 4, 1999.

All three indicators are within their typical ranges. Keeping some AAII members encouraged is the about the short-term outlook for equities 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 what they considered to be the most important characteristic for judging a stock’s potential upside. Responses varied, though profits were cited by the largest number of respondents (37%). These members not only wanted to see earnings, but expressed a preference for earnings growth and earnings exceeding expectations. Valuation was the second most popular characteristic, named by 10% of respondents. Good management and positive cash flow tied for third with each named by 7% of respondents.

This week’s AAII Sentiment Survey results:

  • Bullish: 35.4%, up 4.2 percentage points
  • Neutral: 37.9%, down 2.4 percentage points
  • Bearish: 26.8%, down 1.8 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



March AAII Asset Allocation Survey: Bond Allocations Fall Below 16%

Posted on April 2, 2014 | AAII Survey

Individual investors’ fixed-income allocations fell below their historical average of 16% for just the second time in the past five years. The March AAII Allocation Survey bonds and bond funds reading of 15.7% is the second lowest since May 2009. Stock and cash allocations rose slightly last month.

Stock and stock fund allocations rose 0.3 percentage points to 67.2%. This is the third largest allocation to equities since June 2007 (68.6%), trailing only September 2007 (68.1%) and December 2013 (68.3%). March 2014 was also the 12th consecutive month and the 14th out of the past 15 with equity allocations above their historical average of 60%.

Bond and bond fund allocations declined 0.5 percentage points to 15.7%. As noted above, this is just the second time since 2009 that fixed-income allocations are below their historical average of 16%.

Cash allocations increased by 0.2 percentage points to 17.1%. The increase was not large enough to prevent March from being the 28th consecutive month with cash allocations below their historical average of 24%.

It is important to consider the magnitude of the shifts in portfolio allocations when looking at these latest survey results. Across all three asset categories, the changes were modest. Though the low level of fixed-income exposure is notable—especially when compared against the levels of the past several years—the March results signal a continuation of a longer-term trend. Since last staying above 20% in January 2013, bond and bond fund allocations have decreased by a cumulative 4.5 percentage points. The decline reflects both the expectation that interest rates have bottomed as well as a reaction to ongoing bull market in stocks.

This week’s special question asked AAII members what primarily caused their portfolio allocations to change over the past month. Slightly less than half (44%) of all respondents said buying and selling altered their allocations. A variety of reasons for transacting were given, including rebalancing, taking profits in stocks, raising cash and buying stocks. About 24% said their allocation did not change last month, while 23% attributed the changes in their allocations to market fluctuations. A small group (4%) said they increased their cash positions because of fear or the anticipation of a forthcoming market pullback.

March Asset Allocation Survey results:

  • Stocks and stock funds: 67.2%, up 0.3 percentage points
  • Bonds and bond funds: 15.7%, down 0.5 percentage points
  • Cash: 17.13%, up 0.2 percentage points

March Asset Allocation Survey details:

  • Stocks: 31.0%, down 4.0 percentage points
  • Stock Funds: 36.1%, up 4.2 percentage points
  • Bond Funds: 12.5%, up 0.2 percentage points
  • Bonds: 3.2%, down 0. 7 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.



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.



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



AAII Sentiment Survey: Bullish and Neutral Sentiment Stay above Average

Posted on March 13, 2014 | AAII Survey

Both bullish sentiment and neutral sentiment extended their streaks of above-average readings in the latest AAII Sentiment Survey. Bearish sentiment increased slightly, but continues to stay below its historical average.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 0.8 percentage points to 41.3%. Optimism has now been above its historical average of 39.0% for five consecutive weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, declined 1.0 percentage points to 31.8%. Although this is the second consecutive weekly drop, neutral sentiment remains above its historical average of 30.5% for the 10th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, edged up 0.2 percentage points to 26.8%. Even with the increase, pessimism remains below its historical average of 30.5% for the 23rd time in 27 weeks.

As the numbers show, the trend of cautious optimism and above-average neutral sentiment among individual investors continues. 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 pace of economic expansion and Washington politics.

This week’s special question asked AAII members to predict the odds of the current bull market lasting into at least a sixth year on a scale of “very likely” to “very unlikely.” Respondents were optimistic overall with 34% saying the chances of the bull market celebrating its sixth birthday were somewhat likely, 16% saying likely and 24% saying very likely. Economic growth was the primary reason given. Many respondents also said the sustained low interest rates and the accommodative Federal Reserve policy will help stocks move higher. Less than 15% of respondents do not expect the bull market to reach a sixth year (7% said somewhat unlikely, 5% said unlikely and 2% said very unlikely). Valuations and underlying fundamentals were the top reasons given for the pessimism.

There were some expectations for greater volatility this year. Slightly more than 8% of respondents on both the bullish and bearish side used the words “volatility” or “correction” in their comments.

Here is sampling of the responses:

  • “Somewhat likely because of low interest rates and inflation; there are no good alternatives to stocks right now.”
  • “It will last into the sixth year, but volatility will increase.”
  • “I think it is very likely that the bull market will run for a few more years, if only because the Fed continues to pump a massive amount of liquidity into the system.”
  • “The bull market will last longer because the economy is improving.”
  • “Somewhat unlikely since economic conditions are so-so and P/E’s are moderately high.”

This week’s AAII Sentiment Survey results:

  • Bullish: 41.3%, up 0.8 percentage points
  • Neutral: 31.8%, down 1.0 percentage points
  • Bearish: 26.8%, up 0.2 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



AAII Sentiment Survey: Optimism Continues to Hover Above Its Historical Average

Posted on March 6, 2014 | AAII Survey

Optimism about the short-term direction of stock prices stayed slightly above its historical average for the fourth consecutive week in the latest AAII Sentiment Survey. Pessimism rebounded, but remains below its historical average.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 0.8 percentage points to 40.5%. The historical average is 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, fell 6.3 percentage points to 32.9%. Even with the drop, this is the ninth consecutive week with a neutral sentiment reading above its historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rebounded by 5.5 percentage points to 26.6%. The increase was not large enough to prevent pessimism from being below its historical average of 30.5% for the 22nd time in 26 weeks, however.

Only two other periods with pessimism staying below its historical average for similar periods of time have existed over the past 10 years. The first was a 20-week span between August 19, 2004 and December 30, 2004 with 16 weeks of pessimism below 30.5%. The second was a 23-week span between September 16, 2010 and February 17, 2011 with 20 weeks of pessimism below 30.5%.

When looking at the current trends in individual investor sentiment, it is important to note the lack of high levels of optimism. Although pessimism has mostly been stayed below average over the past six months, bullish sentiment among AAII members—in aggregate—has mostly been levels we would not consider to be enthusiastic.

The events in Ukraine do not appear to have significantly impacted individual investors’ short-term outlook for stock prices so far. A few members did say, in response to this week’s special question, that the crisis is causing them to be more cautious. Some AAII members are also fretting about elevated stock valuations, the pace of revenue growth and Washington politics. Many other AAII members are encouraged by the sustained upward momentum of stock prices, earnings growth, economic growth and the Federal Reserve’s tapering of bond purchases.

This week’s special question asked AAII members how comfortable they are with prevailing stock valuations. Slightly less than half (47%) of respondents described themselves as uncomfortable. The primary reasons given were current price-earnings ratios and the slow pace of economic expansion, particularly job growth. About 26% of respondents said they are comfortable with current valuations. These members pointed to economic growth and the ability to still find stocks trading at attractive valuations. About 9% of respondents said they thought the market was either fairly valued or that they are still comfortable with the market at the current level even though valuations are elevated.

Here is a sampling of the responses:

  • “I’m uncomfortable. Jobs are not increasing at this time.”
  • “Valuations are quite high and a bit stretched from historical norms.”
  • “With current and future economic conditions looking good, I believe we should have a good 2014.”
  • “Valuations are historically a bit high, but this does not make me uncomfortable—only cautious.”

This week’s AAII Sentiment Survey results:

  • Bullish: 40.5%, up 0.8 percentage points
  • Neutral: 32.9%, down 6.3 percentage points
  • Bearish: 26.6%, up 5.5 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



February AAII Asset Allocation Survey: Equity Allocations Above 60% for 11th Month

Posted on March 4, 2014 | AAII Survey

Individual investors’ allocation to equities stayed above 60% for the 11th consecutive month in February, according to the latest AAII Asset Allocation survey. This is the longest such streak since prior to the financial crisis. Fixed-income allocations declined last month, while cash holdings increased slightly.

Stock and stock fund allocations rebounded by 1.3 percentage points to 66.9%. February was not only the 11th consecutive month with equity allocations above their historical average of 60%, but also the 13th out of the past 14 months.

Bond and bond fund allocations declined 0.8 percentage points to 16.2%. Even with the decline, fixed-income allocations were above their historical average of 16% for the 55th time in the past 57 months.

Cash allocations decreased 0.5 percentage points to 16.9%. This made February the 27th consecutive month with cash allocations below their historical average of 24%.

The current streak of above-average equity allocations is the longest since a 12-month streak between August 2003 and July 2004.

February’s rebound in stock prices alleviated some of the short-term fears that a market top had been established in January. Even though the month ended with the S&P 500 at a record high, bullish sentiment remained below the levels recorded at the start of the year. Improving stock prices helped to boost the value of equity allocations while a relatively stable yield environment did not alter the value of fixed-income holdings much.

Last month’s special question asked AAII members what their allocation to emerging markets was, and if had recently changed. The largest group, 38% of respondents, said they did not have any exposure to emerging markets. Approximately 27% of respondents said their emerging markets exposure was 5% or less, while 14% had between 6% and 10% of their portfolio allocated to emerging markets. The vast majority of respondents said their current allocation or lack of exposure to emerging markets has not significantly changed recently. Slightly more than 8% of respondents said they reduced their exposure in recent months, however, while 7% either have or intend to increase their exposure to emerging markets.

Here is a sampling of the responses:

  • “My only exposure is as part of diversified international funds.”
  • “I have nothing in emerging markets, but I am invested in companies that have an international presence.”
  • “I feel that the emerging markets are too risky for me right now, so I have backed out.”
  • “Presently I have no exposure, but I am considering venturing into emerging markets as they continue to melt down.”
  • “Zero and no change. I don’t invest overseas; the U.S. markets are enough of a mystery.”

February Asset Allocation Survey results:

  • Stocks and Stock Funds: 66.9%, up 1.3 percentage points
  • Bonds and Bond Funds: 16.2%, down 0.8 percentage points
  • Cash: 16.9%, down 0.5 percentage points

February Asset Allocation Survey details:

  • Stocks: 35.0%, up 4.1 percentage points
  • Stock Funds: 31.9%, down 2. 8% percentage points
  • Bonds: 3.9%, up 0.4% percentage points
  • Bond Funds: 12.3%, down 1.2% 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.



AAII Sentiment Survey: Neutral Sentiment Hits a Six-Week High

Posted on February 27, 2014 | AAII Survey

Neutral sentiment rose to a six-week high in the latest AAII Sentiment Survey. Optimism stayed above its historical average, while pessimism declined to a nine-week low.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 2.5 percentage points to 39.7%. This is the third consecutive week with optimism above its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, rose 4.2 percentage points to 39.2%. This is the highest reading since January 16, 2014, and just the third time since 2005 that neutral sentiment is above 39.0%. It is also the eighth consecutive week with a neutral sentiment reading above its historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 1.6 percentage points to 21.1%. This is the lowest level of pessimism recorded by our survey since December 26, 2013. It is also the 21st time in the past 25 weeks that bearish sentiment is below its historical average of 30.5%.

Since jumping to 36.4% near the start of this month, bearish sentiment has fallen by a cumulative 15.3 percentage points. Pessimism is now close to the bottom of its typical range of readings. Conversely, neutral sentiment is right at the border of typical and unusually high readings.

Some individual investors are likely watching the S&P 500′s current attempt to break out into new record high territory. An upward move past current levels would encourage those investors who are otherwise optimistic about sustained earnings and economic growth and the Federal Reserve’s tapering of bond purchases. A failure by the market to move higher could renew fears about stock prices having established a short-term top and that a correction could be forthcoming. Some AAII members are also fretting about elevated stock valuations, the pace of revenue growth and Washington politics.

This week’s AAII Sentiment Survey:

  • Bullish: 39.7%, down 2.5 percentage points
  • Neutral: 39.2%, up 4.2 percentage points
  • Bearish: 21.1%, down 1.6 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



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