A Third of Investors Expect Little to No Impact When Rates Are Raised

Posted on June 25, 2015 | AAII Survey

This week’s special question asked AAII members what impact the first interest rate hike will have on stock prices. Just under 35% of respondents said it will have little to no impact, with many reasoning that the first rate hike is well anticipated. A nearly equal number said there will be a short-term negative reaction, though the majority of these respondents anticipate stocks rebounding fairly quickly. Slightly more than 19% think stocks will fall, with some anticipating a decline of 10% or more. A small group of optimists (7%) expect to stocks react positively.

Here is a sampling of the responses:

  • “Very little. I think the anticipation of a rate hike is already priced in.”
  • “Minimal effect. It is already baked into the market.”
  • “Some investors will freak out and there will be a pullback in stock prices across the board.”
  • “A swift 5% drop after the announcement, followed by a recovery 2-3 months later.”
  • “A short-term downward blip, but recovering within 30 days.”
  • “If the market hasn’t factored a rate hike in all this time, it never will.”


Optimism Surges and Pessimism Plunges

Posted on June 25, 2015 | AAII Survey

Optimism surged to a three-month high as pessimism plunged to a four-month low in the latest AAII Sentiment Survey. Neutral sentiment continues to stay at an unusually high level.

Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 10.1 percentage points to 35.6%. Optimism was last higher on March 26, 2015 (38.4%). Even with the big increase, bullish sentiment remains below its historical average of 39% for the 16th consecutive week—the first such occurrence since a 20-week streak between April 5 and August 16, 2012.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 2.5 percentage points to 42.8%. The rise keeps neutral sentiment above its historical average of 31.0% for the 25th consecutive week and at an unusually high level for a 12th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, plunged 12.6 percentage points to 21.7%. The drop follows what had been a 10-month high and puts pessimism at its lowest level since February 26, 2015 (20.3%). The historical average is 30%.

The big rebound in optimism and large drop in pessimism comes as the major indexes have bounced off of their recent lows. It also follows a period of seven consecutive weeks with bullish sentiment staying below 30%, the longest such streak since early 2003.

This week’s reading puts pessimism below its historical average for the 20th time this year, or 20 out of the past 26 weeks. Bearish sentiment is near the lower level of its typical range, but is not currently at an unusually low level.

This week’s AAII Sentiment Survey results:

  • Bullish: 35.6%, up 10.1 percentage points
  • Neutral: 42.8%, up 2.5 percentage points
  • Bearish: 21.7%, down 12.6 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 31.0%
  • Bearish: 30.0%

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.



Member Opinions Mixed on State of Consumers Today

Posted on June 18, 2015 | AAII Survey

This week’s special question asked AAII members how they thought the average consumer is faring relative to a year ago. About one-third (32%) of all respondents said the average consumer is doing better. An additional 12% said the average consumer is doing somewhat or slightly better. The ongoing improvement within the job market was the most common reason given as to why. Lower fuel prices were a secondary reason, and were cited by the majority of all respondents. Slightly more than 20% of respondents said the average consumer is faring about the same as last year, with several citing low wage growth as a headwind. More than 21% of respondents think the average consumer is worse off or is otherwise struggling, primarily because of wage increases not keeping up with inflation in goods and services other than fuel.

Here is a sampling of the responses:

  • “Better. Gas prices are down and real wages are up from a year ago, resulting in improved consumer confidence.”
  • “Better. Wages are improving and the cost of living is the same or better, mostly from lower gasoline prices.”
  • “I think slightly less well than before. Gas prices are down, but food costs seem higher.”
  • “I would say generally better. It seems like retail and dining establishments are busy.”
  • “Not as well. Food prices have increased and salaries have not kept up.”
  • “No different as wages have stagnated.”


AAII Sentiment Survey: Pessimism Hits a 10-Month High

Posted on June 18, 2015 | AAII Survey

Optimism rebounded and pessimism rose to a 10-month high in the latest AAII Sentiment Survey. The changes came as neutral sentiment plunged to its lowest level since early April.

Bullish sentiment, expectations that stock prices will rise over the next six months, jumped 5.4 percentage points to 25.4%. The rebound follows what had been the lowest level of optimism since April 11, 2013. Even with the increase, bullish sentiment is below its historical average of 39% for a 15th consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 7.1 percentage points to 40.3%. This is the lowest reading since April 2, 2015 (32.6%). It also ends a record streak of 10 consecutive weeks with neutral sentiment at or above 45%. Nonetheless, neutral sentiment is above its historical average of 31.0% for the 24th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 1.7 percentage points to 34.3%. Pessimism was last higher on August 7, 2014 (38.2%). This week’s increase keeps bearish sentiment above its historical average of 30.0% for just the sixth time this year.

Though individual investors’ short-term outlook became more polarized this week, neutral sentiment remains at an unusually high level—even with this week’s drop. There is not a single reason to explain the higher level of polarization this week, particularly since the Federal Open Market Committee’s statement was released near the end of this week’s survey period, though the shift does follow what had been a very low reading for bullish sentiment. The level of optimism registered last week was among the 40 lowest in the survey’s history.

Even with this week’s changes, optimism remains at an unusually low level and neutral sentiment, as noted above, remains at an unusually high level. Both such occurrences have typically been followed by better-than-average six- and 12-month returns for the S&P 500. For more information, see my May 21 AAII Investor Update, Unusually High Neutral Sentiment Often Followed by Good Returns. (There is no guarantee, however, that history will repeat.)

Some AAII members are concerned about the possibility of a bigger decline in stock prices occurring, the pace of economic growth and lack of wage growth, valuations, the impact of the stronger dollar on earnings and geopolitical events. Keeping other AAII members encouraged are the ongoing bull market, sustained economic expansion, earnings growth and still-accommodative monetary policy.

This week’s AAII Sentiment Survey results:

  • Bullish: 25.4%, up 5.4 percentage points
  • Neutral: 40.3%, down 7.1 percentage points
  • Bearish: 34.3%, up 1.7 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 31.0%
  • Bearish: 30.0%

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 High M&A Activity and the Market

Posted on June 11, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members what they think about this year’s relatively high level of merger and acquisition (M&A) activity. Responses varied. The largest group of respondents (17%) said the elevated level of activity was a reflection of low interest rates and an attempt to close to deals before rates rise. About 13% of respondents described the deal-making activity as a positive for the market, with an additional 5% saying the mergers reflected improved economic and market conditions. A nearly equal number of respondents said this year’s jump in M&A activity is a sign of a market top, is concerning, or that corporations are sitting on too much cash (8% for each group). Many of those who thought corporations are sitting on too much cash wanted more money returned to shareholders instead. More than 11% of respondents said they do not have an opinion or haven’t given much thought to the higher level of deal-making.

Here is a sampling of the responses:

  • “Interest rates remain at historical lows, which makes now a good time to finance acquisitions.”
  • “It indicates that stocks may not be overvalued at still low interest rates.”
  • “A lack of profitable opportunities is causing firms to consolidate and seek enhanced profitability.”
  • “Companies have too much cash…they should buy back stock or declare a special dividend.”
  • “I think companies are taking advantage of cheap money because they know it won’t last much longer.”
  • “More or less expected…I think the end results could be detrimental to the acquiring company.”


AAII Sentiment Survey: Optimism Plunges to a Two-Year Low

Posted on June 11, 2015 | AAII Survey

Optimism plunged to a two-year low as pessimism surged to its highest level in nine months, according to the latest AAII Sentiment Survey. Neutral sentiment continued its streak of unusually high readings.

Bullish sentiment, expectations that stock prices will rise over the next six months, plunged 7.3 percentage points to 20.0%. Optimism was last lower on April 11, 2013 (19.3%). The drop puts bullish sentiment below its historical average of 39.0% for the 14th consecutive week. Optimism is also below 30% for a sixth consecutive week, the longest such streak since a seven-week stretch between January 16 and February 27, 2003.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined by 0.7 percentage points to 47.4%. The minor change keeps neutral sentiment at or above 45% for a record 10th consecutive week. This week is also the 23rd consecutive week with a neutral sentiment reading above its historical average of 31.0%.

Bearish sentiment, expectations that stock prices will fall over the next six months, surged 8.0 percentage points to 32.6%. Pessimism was last higher on October 16, 2014 (33.7%). The jump puts bearish sentiment above its historical average of 30.0% for just the fifth time this year and for the first time since April 2, 2015.

Bullish sentiment readings below 28.6% are unusually low, and unusually low levels of optimism have typically been followed by better-than-average six- and 12-month returns for the S&P 500. Similarly, the S&P 500 has realized better-than-average returns when neutral sentiment is at an unusually high level, as it currently remains. For more information, see my May 21 AAII Investor Update, Unusually High Neutral Sentiment Often Followed by Good Returns. (There is no guarantee, however, that history will repeat.)

It’s worth noting that the S&P 500 declined throughout most of the survey period, before rebounding yesterday. This decline may have contributed to concerns about the stock market having established a short-term top or being close to doing so. In addition to nervousness about the recent price volatility and possibility of a notable decline in stock prices occurring, some AAII members are also concerned about the pace of economic growth, the impact of the stronger dollar on earnings growth and geopolitical events. Keeping other AAII members encouraged are the ongoing bull market, sustained economic expansion, earnings growth and still-accommodative monetary policy.

This week’s AAII Sentiment Survey results:

  • Bullish: 20.0%, down 7.3 percentage points
  • Neutral: 47.4%, down 0.7 percentage points
  • Bearish: 32.6%, up 8.0 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 31.0%
  • Bearish: 30.0%

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 Is Below 30% for a Fifth Week

Posted on June 4, 2015 | AAII Survey

Even with a slight increase, optimism remains below 30% for a fifth consecutive week in the latest AAII Sentiment Survey—a streak not seen since early 2003. Neutral sentiment continues to stay at an unusually high level, while pessimism is still at below-average levels.

Bullish sentiment, expectations that stock prices will rise over the next six months, edged up 0.3 percentage points to 27.3%. Even with the slight increase, optimism is below its historical average of 39.0% for the 13th consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased slightly (0.2 percentage points) to 48.0%. The minor change keeps neutral sentiment at or above 45% for a ninth consecutive week—the longest such streak in the survey’s 28-year history. This week is also the 22nd consecutive week with a neutral sentiment reading above its historical average of 31.0%.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined 0.5 percentage points to a five-week low of 24.6%. The decline keeps pessimism below its historical average of 30.0% for a ninth consecutive week and for the 19th week this year.

As noted above, bullish sentiment is now below 30% for a fifth consecutive week. This is the longest such streak since a seven-week stretch between January 16 and February 27, 2003.

Bullish sentiment readings below 28.6% are unusually low, and unusually low levels of optimism have typically been followed by better-than-average six and 12 months returns for the S&P 500. Similarly, the S&P 500 has realized better-than-average returns when neutral sentiment is at an unusually high level, as it currently remains. For more information, see my May 21 AAII Investor Update, Unusually High Neutral Sentiment Often Followed by Good Returns. (There is no guarantee, however, that history will repeat.)

Causing some 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 on earnings growth and worries that a notable decline in stock prices could occur. Keeping other AAII members encouraged are the ongoing bull market, sustained economic expansion, earnings growth and still-accommodative monetary policy.

This week’s AAII Sentiment Survey results:

  • Bullish: 27.3%, up 0.3 percentage points
  • Neutral: 48.0%, up 0.2 percentage points
  • Bearish: 24.6%, down 0.5 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 31.0%
  • Bearish: 31.0%

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.



Interest Rates, Low Yields Affect Members’ Bond Allocations

Posted on June 2, 2015 | AAII Survey, Asset Allocation

May’s Asset Allocation Survey special question asked AAII members what predominately influences their decision to increase or reduce exposure to bonds and bond funds. About 38% of respondents said interest rates influence their bond allocation. Approximately 13.9% said that current low yields affect their decision. Roughly 12% of respondents noted that they do not allocate to bonds at all. Other responses were evenly distributed among factors such as market volatility, market valuations or behavior, expected withdrawal, rebalancing and the economy.

Here is a sampling of the responses:

  • “I will invest in bond funds when I feel the value in security outweighs the risks of owning only stocks.”
  • “I’ve been staying away from bonds for several years, I just don’t like their dynamics right now.”
  • “My allocation of bonds is based on current economic conditions and my portfolio mix.”
  • “Interest rates. I buy bonds and hold them to maturity. When interest rates are so low that utility stocks are clearly a better buy, I don’t renew in bonds.”


Stock and Stock Fund Allocations Fall to Below-Average Levels

Posted on June 2, 2015 | AAII Survey, Asset Allocation

Fixed-income allocations fell to their lowest level in a year, as individual investors remain frustrated with low interest rates. Cash allocations, meanwhile, rose for a second consecutive month as equity allocations declined.

Stock and stock fund allocations declined 0.2 percentage points to 67.7%, the lowest level since January. Even with the decline, equity allocations remained above their historical average of 60% for the 26th consecutive month.

Bond and bond fund allocations fell 0.7 percentage points, to 15.5%. Fixed-income allocations were last lower in December 2013 (15.2%). The historical average is 16.0%.

Cash allocation rose 1.0 percentage points, to 16.9%. Cash allocations were last higher in October 2014 (18.7%). Despite the increase, May was the 42nd consecutive month with cash allocations below their historical average of 24%.

The rise in cash allocations occurred as neutral sentiment (as measured by the weekly AAII Sentiment Survey) has stayed at or above 45% for eight consecutive weeks and above average for 21 consecutive weeks. Though cash allocations have risen for two consecutive weeks, allocations to stocks and stock funds remain high as investors fret over low interest rates and see a lack of attractive alternatives for their portfolio dollars. Speculation about an interest rate increase occurring this year may also have contributed to the decline in fixed-income allocations.

May AAII Asset Allocation Survey results:

  • Stock and Stock Funds: 67.7%, down 0.2 percentage point
  • Bond and Bond Funds: 15.5%, down 0.7 percentage point
  • Cash: 16.9%, up 1.0 percentage point

May AAII Asset Allocation Details:

  • Stocks: 33.1%, up 0.9 percentage point
  • Stock Funds: 34.6%, down 1.1 percentage points
  • Bonds: 3.6%, up 0.3 percentage point
  • Bond Funds: 11.8%, down 1.0 percentage point

*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.



Health Care and Tech Favored Among Members

Posted on May 28, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members what sectors or industries they are currently favoring. About 35% of respondents favored the health care sector, 20% were optimistic regarding technology, approximately 17% were bullish regarding energy, 10% preferred financials, 6.8% liked consumer staples, 5% favored industrials, 3% were for consumer cyclical and 2.6% were bullish towards basic materials. Within each of the sectors, there was favoritism shown toward biotechnology, pharmaceuticals, oil and gas, real estate, and banks. There were some mentions of emerging markets and European stocks as well.

Here is a sampling of the responses:

  •  “Biotechnology, pharmaceuticals and oil and gas.”
  • “I like consumer discretionary, because those in upper income brackets will spend consistently. I also like manufacturing, as long as the companies are sound.”
  • “Big pharma is my favorite sector right now. The introduction of biosimilars is heating up the competition. Let the winners run.”
  • “Oil has been beaten down quite a bit in the last year. Some snap back is likely, in my opinion.”
  • “Health-related industries. Demand for services and/or medications when needed does not go down with the fluctuations in the overall economy.”


Older Entries »