AAII Sentiment Survey: Optimism Stays Near 50%

Posted on October 30, 2014 | AAII Survey

Optimism remained near 50% as many individual investors are encouraged about the short-term outlook for stock prices, according to the latest AAII Sentiment Survey. Neutral sentiment rose this week, while pessimism declined further.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 0.3 percentage points to 49.4%. Optimism is above its historical average of 39.0% for the fourth consecutive week and the 11th out of the past 12 weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.7 percentage points to 29.6%. Even with the increase, neutral sentiment remains below its historical average of 30.5% for the fifth time in the past six weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, declined by 1.4 percentage points to 21.1%. This week’s decline puts pessimism at a nine-week low and brings the two-week drop to a cumulative 12.6 percentage points. The historical average is 30.5%.

Bullish sentiment is above 49% on consecutive weeks for the first time since February 3 and February 10, 2011. Even with this week’s decline, optimism remains at unusually high levels (more than one standard deviation above average). Past readings of unusually high optimism have typically been followed by lower-than-average levels of market gains, as I explained in the June 2014 AAII Journal.

Bearish sentiment is near the bottom of its typical range. A drop below 20.5% would put bearish sentiment at an unusually low level (more than one standard deviation below average). In the past, unusually low readings have been followed by modestly lower-than-average six- and 12-month gains in the S&P 500.

As I discussed last week, many individual investors viewed this month’s bout of downward volatility as a buying opportunity. The pullback in the S&P 500 index and the correction in the Russell 2000 index made valuations more attractive and helped to alleviate concerns about stock prices having moved too far upward too fast. Also contributing to the level of optimism are earnings growth, sustained economic expansion and the Federal Reserve’s tapering of bond purchases. Keeping some AAII members cautious are worries that a larger drop in stock prices is forthcoming, a sense that prevailing valuations are still too high, geopolitical events, the pace of economic growth and Washington politics.

AAII Sentiment Survey results:

  • Bullish: 49.4%, down 0.3 percentage points
  • Neutral: 29.6%, up 1.7 percentage points
  • Bearish: 21.1%, 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.



Volatility Making AAII Members More Likely to Buy

Posted on October 23, 2014 | AAII Survey

This week’s special question asked AAII members how the recent volatility has influenced their willingness to buy stocks. About 44% of respondents said they are either looking to buy, are more willing to buy or have bought. Another 19% said they are anticipating a bigger drop, looking for confirmation of a bottom or are sitting on the sidelines. Roughly 9% said the volatility hasn’t altered their willingness to buy stocks, with many of these respondents saying that they follow long-term strategies. Less than 4% of respondents said they have sold stocks in response to the volatility.

Here is a sampling of the responses:

  • “I have bought some stocks and may buy more.”
  • “I purchased a stock on my ‘shopping list’ because blood appeared on the street.”
  • “Accelerated my efforts to find quality stocks to purchase now that they are ‘on sale.’”
  • “I am waiting for better prices on the stocks I have been monitoring.”
  • “Waiting for the official correction to buy more stocks.”
  • “I wish I had more cash to buy stocks.”


AAII Sentiment Survey: Bullish Sentiment Surges to 49.7%

Posted on October 23, 2014 | AAII Survey

The proportion of individual investors expressing optimism about the short-term direction of the stock market surged to 49.7% in the latest AAII Sentiment Survey. At the same time, pessimism plunged.

Bullish sentiment, expectations that stock prices will rise over the next six months, jumped by 7.0 percentage points to 49.7%. This is the highest level of optimism registered by our survey since August 28, 2014 (51.9%). It is also the 10th week out of the past 11 with optimism above its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 4.2 percentage points to 27.8%. Even with the increase, neutral sentiment is below its historical average of 30.5% for the fourth week in the past five.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell by 11.2 percentage points to 22.5%. The large drop puts pessimism at its lowest level since August 28, 2014.

As the results to this week’s special question show, many individual investors viewed the recent downward volatility as a buying opportunity. The pullback in the S&P 500 and the correction in the Russell 2000 made valuations more attractive and helped to alleviate concerns about stock prices having moved too far upward too fast. Also contributing to the level of optimism are earnings growth, sustained economic expansion and the Federal Reserve’s tapering of bond purchases. Keeping other AAII members cautious are worries that a larger drop in stock prices is forthcoming, a sense that prevailing valuations are still too high, geopolitical events, the pace of economic growth and Washington politics.

Bullish sentiment has risen by a cumulative 14.3 points over the past three weeks. At current levels, optimism is at an unusually high level (more than one standard deviation above average). Past readings of unusually high optimism have typically been followed by lower-than-average levels of market gains, as I explained in the June 2014 AAII Journal.

This week’s AAII Sentiment Survey results:

  • Bullish: 49.7%, up 7.0 percentage points
  • Neutral: 27.8%, up 4.2 percentage points
  • Bearish: 22.5%, down 11.2 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 Members Favoring Health Care Stocks

Posted on October 16, 2014 | AAII Survey

This week’s Sentiment Survey special question asked AAII members what industries or sectors they like right now. Nearly one-third (31%) of respondents said they liked health care stocks. Energy ranked second, picked by more than quarter of respondents (26%). Technology ranked third (16%), followed by financial companies in fourth place (14%). When we last asked this question in early June 2014, respondents said they liked energy, followed by technology and health care, and then industrials.



AAII Sentiment Survey: Optimism Rises as Sentiment Becomes More Polarized

Posted on October 16, 2014 | AAII Survey

Optimism among individual investors rose to a six-week high despite the recent downward volatility in stock prices, according to the latest AAII Sentiment Survey. Neutral sentiment fell to its lowest level in 19 months, while pessimism rose to a two-month high.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 2.8 percentage points to 42.7%. This is the highest level of optimism registered by our survey since September 4, 2014 (44.7%). It is also the ninth week out of the past 10 with optimism above its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 5.5 percentage points to 23.6%. This is the lowest neutral sentiment has been since March 14, 2013 (22.6%). It is also the third week in the past four with a neutral sentiment reading below the historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 2.7 percentage points to 33.7%. The increase puts pessimism above its historical average of 30.5% for the third consecutive week.

We’re starting to see some signs of polarization in terms of attitudes towards the market. Neutral sentiment has plunged by a cumulative 10.1 percentage points over the past two consecutive weeks. The drop has put neutral sentiment close to the bottom of its historical range. (One standard deviation below average is 22.1%.) At the same time, bullish sentiment has rebounded by a cumulative 7.3 percentage points over the same period. As far as pessimism, the current three-week streak of above-average bearish sentiment readings is the first such streak since August 22 through September 5, 2013.

Some AAII members have been looking for a dip in stock prices to reduce valuations, and this may be contributing to the increased optimism. Also playing roles are earnings growth, sustained economic expansion and the Federal Reserve’s tapering of bond purchases. Keeping other AAII members cautious are worries about a continued drop in stock prices, a sense that prevailing valuations are still too high, geopolitical events, the pace of economic growth and Washington politics.

This week’s AAII Sentiment Survey results:

  • Bullish: 42.7%, up 2.8 percentage points
  • Neutral: 23.6%, down 5.5 percentage points
  • Bearish: 33.7%, up 2.7 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.



Members Closely Watching Monetary Policy, Interest Rates

Posted on October 9, 2014 | AAII Survey

This week’s special question asked AAII members if there are any economic or market-related characteristics they are looking for over the next few months. Monetary policy and interest rates, the November elections, economic growth and geopolitics were listed by the largest number of respondents. Just under 20% of respondents said they are watching how Federal Reserve policy will evolve and what interest rates will do in response. Nearly 18% are awaiting to see the outcome of the November elections. About 16% are monitoring economic growth, with several watching job growth specifically. Geopolitical events were named by 14% of respondents. Ebola was cited by slightly less than 5% of all respondents.



AAII Sentiment Survey: Optimism Rebounds; Pessimism Stays Above Average

Posted on October 9, 2014 | AAII Survey

Optimism rebounded back above its historical average after having fallen by 6.8 percentage points between September 18 and October 1. Though bearish sentiment increased ever so slightly (0.1 percentage points), this is just the fourth time in the past 12 months that pessimism is above its historical average on back-to-back weeks.

Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded by 4.5 percentage points to 39.9%. This is the eighth week out of the past nine with optimism above its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 4.5 percentage points to 29.1%. The historical average is 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, edged up by a mere 0.1 percentage points to 31.0%. The historical average is 30.5%.

Both bullish and bearish sentiment are very close to their historical averages. This is occurring as stocks are experiencing both upward and downward volatility. Keeping some individual investors optimistic are the S&P 500’s overall upward momentum, earnings growth, sustained economic expansion and the Federal Reserve’s tapering of bond purchases. Keeping others cautious are worries about the possibility of a correction, prevailing valuations, geopolitical events, the pace of economic growth and Washington politics.

This week’s AAII Sentiment Survey:

  • Bullish: 39.9%, up 4.5 percentage points
  • Neutral: 29.1%, down 4.5 percentage points
  • Bearish: 31.0%, 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.



Investor Attitudes Mixed Over Small-Cap Stock Performance

Posted on October 2, 2014 | AAII Survey

This week’s special question asked AAII members how the performance of small-cap stocks is affecting their six-month outlook for the overall stock market. Responses were mixed. The largest group, 40% of all respondents, said the weakness in small-cap stocks was not having any impact. Some of these respondents said they don’t invest in small-cap stocks or don’t view them as being a leading indicator of market direction. Slightly more than 16% of respondents viewed this year’s returns for small caps as a bearish sign for the broader market. An additional 7% of respondents said the decline in small-cap stocks has made them more cautious. On the other hand, about 10% of respondents thought small-cap stocks will rebound.

Here is a sampling of the responses:

  • “I don’t feel you can gain insights into the market as a whole by looking at market segments in isolation.”
  • “I hold very few small-cap stocks and only as speculative plays.”
  • “I expect small-cap stocks to get better as the economy improves.”
  • “It’s giving me reason for caution, so I’m cautiously optimistic as to the six-month outlook.”
  • “I do not consider small caps as part of my analysis.”


AAII Sentiment Survey: Pessimism Rises to a Three-Month High

Posted on October 2, 2014 | AAII Survey

Pessimism among individual investors about the short-term direction of stock prices rose to a three-month high in the latest AAII Sentiment Survey. Neutral sentiment also rose, while optimism fell to its lowest level since early August.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 6.4 percentage points to 35.4%. The drop puts optimism at its lowest level since August 7, 2014 (30.9%). It also ends a seven-week streak of bullish sentiment readings above the historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rebounded by 3.7 percentage points to 33.7%. The historical average is 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, rose 2.7 percentage points to 30.9%. This is the highest level of pessimism registered by our survey since August 7, 2014 (38.2%). The historical average is 30.5%.

Pessimism has risen by a cumulative 7.9 percentage points over the past two weeks as the S&P 500 has retreated from its recent highs. Though individual investors felt more cautious this week, it should be pointed out that this is just the eighth time in the past 12 months that pessimism is above its historic average.

In addition to the recent weakness in stock prices, prevailing valuations, events in the Middle East and Ukraine, the pace of economic growth and Washington politics are weighing on investors’ moods. Keeping other individual investors optimistic about the short-term direction of stock prices is the S&P 500’s overall upward momentum, earnings growth, sustained economic expansion and the Federal Reserve’s tapering of bond purchases.

This week’s AAII Sentiment Survey results:

  • Bullish: 35.4%, down 6.4 percentage points
  • Neutral: 33.7%, up 3.7 percentage points
  • Bearish: 30.9%, up 2.7 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.



September AAII Asset Allocation Survey: Fixed Income Rises to an 8-Month High

Posted on October 1, 2014 | AAII Survey

Individual investors boosted their fixed-income and cash allocations last month, according to the September AAII Asset Allocation survey. Bond and bond fund allocations are at an eight-month high, while stock and stock fund allocations are at a four-month low.

Stock and stock fund allocations declined 0.6 percentage points to 66.7%. This is the smallest equity weighting since May 2014 (65.3%). Even with the decline, stock and stock fund allocations remained above their historical average of 60% for the 18th consecutive month and the 20th out of the past 21 months.

Bond and bond fund allocations increased 0.2 percentage points to 16.8%. This is the largest allocation to fixed income since January 2014 (17.0%). The historical average is 16%.

Cash allocations rose 0.5 percentage points to 16.5%. Even with the increase, September was the 34th consecutive month with cash allocations below their historical average of 24%.

After falling in the first half of the year, fixed-income allocations rebounded in the third quarter. Bond and bond fund allocations have stayed at or above 16% since yields on the 10-year Treasury started staying largely below 2.6% in early summer. Cash allocations have shown more variance over the past several months, with some of the fluctuations potentially being due to differences in which AAII members took the survey on a given month. Stock allocations have remained above 65% throughout 2014, aided in part by the market’s upward momentum.

The shift in allocations this month is subtle and does not appear to signal a shift in preferences. Many AAII members continue to be frustrated by low bond yields and low interest rates on money market accounts. Plus, optimism about the short-term direction of stock prices remained above average throughout September.

September Asset Allocation Survey results:

  • Stocks and Stock Funds: 66.7%, down 0.6 percentage points
  • Bonds and Bond Funds: 16.8%, up 0.2 percentage points
  • Cash 16.5%, up 0.5 percentage points

September Asset Allocation Survey details:

  • Stocks: 33.9%, up 2.8 percentage points
  • Stock Funds: 32.8%, down 3.3 percentage points
  • Bonds: 4.2%, up 1.1 percentage points
  • Bond Funds: 12.6%, down 1.0 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/assetallocationsurvey.



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