Members Split on Whether First-Quarter Results Change Their Outlook

Posted on May 21, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members if first-quarter earnings have influenced their six-month outlook for stocks. About three of out every 10 respondents (31%) said recent earnings announcements have made them more bearish over the next six months. Nineteen percent described themselves as being bullish over the next six months. Close to 50% of respondents said that first-quarter earnings results have not affected their six-month outlook on the stock market.

Here is a sampling of the responses:

  • “Confirming my opinion, market earnings were not as robust as many analyst had expected.”
  • “A diversified portfolio will go up and down in the short term. I intend to maintain my allocations, and the first quarter reports are irrelevant to me.”
  • “First-quarter earnings are prompting me to take a more cautious outlook on stocks and to think about a larger investment in bond funds.”
  • “I am in it for the long run and try to ignore the daily flack. I believe over the long run stocks should be part of my portfolio.”
  • “Affirmed my moderately bullish outlook.”
  • “Not materially, first-quarter 2015 earnings were pretty much as expected for most companies I follow.”


AAII Sentiment Survey: Neutral Sentiment Stays Above 45% for Record Stretch

Posted on May 21, 2015 | AAII Survey

Neutral sentiment set a new record for the longest stretch above 45%, which has now reached its seventh consecutive week. Optimism set a new two-year low for the third consecutive week in the latest AAII Sentiment Survey.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 1.5 percentage points to 25.2%. This is the lowest amount of optimism recorded by our survey since April 11, 2013 (19.3%). The drop keeps optimism below its historical average of 39% for the 11th week in a row. This streak now ties an 11-week below-average stretch between March 20 and May 29, 2014.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 2.9 percentage points to 49.8%. The increase keeps neutral sentiment above 45% for the seventh consecutive week and above its historical average of 31.0% for the 20th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 1.4 percentage points to 25.0%. This is the 17th week this year where pessimism has been below its historical average of 30%.

Neutral sentiment set a new record for consecutive weeks above 45%, beating a 27-year record. Neutral sentiment stayed above 45% on six consecutive weeks between May 13 and June 17, 1988. The new record of seven weeks above 45% spans from April 9 to May 21, 2015.

Bullish sentiment remains at an unusually low level, while neutral sentiment continues to stay at an unusually high level. Historically, such readings—both unusually high low bullish sentiment and unusually high neutral sentiment—have been correlated with better-than-average market performance over the following six- and 12-month periods. (See Analyzing the AAII Sentiment Survey Without Hindsight in the June 2014 AAII Journal for more information.) There is no guarantee history will repeat itself in the future, however.

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: 25.2%, down 1.5 percentage points
  • Neutral: 49.8%, up 2.9 percentage points
  • Bearish: 25.0%, down 1.4 percentage points

Historical averages:

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

The AAII Sentiment Survey has been conducted weekly since June 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.



Change in Oil Prices Has Minor Impact on Investor Attitudes

Posted on May 14, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members how the rebound in oil prices has impacted their six-month outlook for stock prices. About 12% of respondents said that the rebound affected their outlook negatively. Approximately 27% said that the increase in oil prices affected their outlook favorably. The majority of respondents, 61%, felt that the change in the price of oil has not altered their outlook.

Here is a sampling of the responses:

  • “The oil market improvement has not really affected my outlook. The present international situation, the Federal Reserve intervention and slow growth of the economy have the most impact on my outlook.”
  • “No, I’m more focused on corporate earnings and GDP growth.”
  • “Very little. I think the underlying competitive struggle between U.S. and Middle East (particularly Saudi Arabia) will leave the price movement neutral on average over the period.”
  • “Modest increases in oil prices should have a positive impact on stock prices.”
  • “Bullish impact because the partial rebound in oil prices will partially reverse the dramatic downturn in the energy sector caused by the oil price collapse.”
  • “Negative impact on market due to fewer investment dollars.”


AAII Sentiment Survey: Optimism Falls to a New Two-Year Low

Posted on May 14, 2015 | AAII Survey

Optimism set a new two-year low for the second consecutive week in the latest AAII Sentiment Survey. Neutral sentiment stayed above 45% for a sixth consecutive week, tying a 27-year record, while pessimism declined slightly.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 0.3 percentage points to 26.7%. This is the lowest level of optimism since April 11, 2013 (19.3%). Bullish sentiment remains below its historical average of 39% for a 10th week in a row. This streak is the longest since an 11-week stretch between March 20 and May 29, 2014.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 0.8 percentage points to 46.9%. The increase keeps neutral sentiment above 45% for the sixth consecutive week and above its historical average of 31% for the 19th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 0.5 percentage points, to 26.4%. This is the 16th week this year where pessimism has been below its historical average of 30.0%.

The current streak of six consecutive weekly neutral sentiment readings at or above 45% ties a record last set in 1988. Neutral sentiment stayed above 45% on consecutive weeks between May 13 and June 17, 1988. It was at or above 45% on consecutive weeks between January 22 and February 26, 1988. (Prior to 2000, the sentiment readings were rounded to the nearest full digit.)

Bullish sentiment remains at an unusually low level, while neutral sentiment continues to stay at an unusually high level. Historically, such readings—both unusually high low bullish sentiment and unusually high neutral sentiment—have been correlated with better-than-average market performance over the following six- and 12-month periods. (See Analyzing the AAII Sentiment Survey Without Hindsight in the June 2014 AAII Journal for more information.) There is no guarantee history will repeat itself in the future, however.

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: 26.7%, down 0.3 percentage points
  • Neutral: 46.9%, up 0.8 percentage points
  • Bearish: 26.4%, down 0.4 percentage points

Historical averages:

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

The AAII Sentiment Survey has been conducted weekly since June 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 Falls to a Two-Year Low

Posted on May 7, 2015 | AAII Survey

Optimism fell to a two-year low as neutral sentiment stayed above 45% for a fifth consecutive week in the latest AAII Sentiment Survey. Pessimism rose to a one-month high.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 3.8 percentage points to 27.1%. This is the lowest amount of pessimism recorded by our survey since April 18, 2013 (26.8%). The drop puts optimism below its historical average of 39.0% for a ninth consecutive week, the longest such streak since an 11-week stretch between March 20 and May 29, 2014.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 1.1 percentage points to 46.1%. The increase keeps neutral sentiment above 45% for a fifth consecutive week, the longest such streak since a six-week stretch between May 13 and June 17, 1988. It also keeps neutral sentiment above its historical average of 31.0% for the 18th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, jumped 4.9 percentage points to 26.8%. Pessimism was last higher on April 2, 2015. Nonetheless, this is the 15th week this year with a bearish sentiment reading below its historical average of 30.0%.

Bullish sentiment is now at an unusually low level, while neutral sentiment continues to stay at an unusually high level. Historically, such readings—both unusually low bullish sentiment and unusually high neutral sentiment—have been correlated with better-than-average market performance over the following six- and 12-month periods. (See Analyzing the AAII Sentiment Survey Without Hindsight in the June 2014 AAII Journal for more information.) There is no guarantee history will repeat itself in the future, however.

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: 27.1%, down 3.8 percentage points
  • Neutral: 46.1%, down 1.1 percentage points
  • Bearish: 26.8%, up 4.9 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 Cautious About High Stock Valuations

Posted on May 7, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members what their comfort level with current stock valuations is. (Most of the responses were given before Fed Chair Janet Yellen described stock valuations as “generally being quite high” yesterday.) About three out of every 10 respondents (31%) said valuations are high or that they are uncomfortable with how stocks are currently priced. An additional 16% of respondents described themselves as being cautious or are somewhat uncomfortable with current valuations or otherwise said that stocks are somewhat expensive. Close to 13% described stocks as currently either being fairly or fully valued. Just under 14% of respondents say they are comfortable with current valuations.

Here is a sampling of the responses:

  • “I feel that stocks are somewhat overvalued, but I don’t see a minor bear market for at least six months.”
  • “I think valuations are on the high end, but maybe not at their highs.”
  • “There are many stocks whose price-earnings ratios fit in my comfort zone.”
  • “Valuations are high, but there is nowhere else to get any kind of return.”
  • “The recent economic measurements do not support current stock market prices.”
  • “Stock prices are inflated because capital gains and dividends are the only game in town.”


Cash Allocations Hit Five-Month High

Posted on May 4, 2015 | AAII Survey

Cash allocations rose to their highest level of the year last month, according to the April AAII Asset Allocation Survey. Individual investors’ allocations to stock and stock funds ticked down slightly from March’s multi-year high. Bond and bond fund allocations also declined.

Stock and stock fund allocations fell to 67.9%, down 0.7 percentage points. In March, equity allocations had been at their highest level since June 2007. Even with April’s decline, stock and stock fund allocations remain above their historical average of 60%, which has now continued for 25 consecutive months.

Bond and bond fund allocations decreased 0.3% to 16.2%. Despite the decline, April is the 11th consecutive month with fixed-income allocations at or above their historical average of 16%.

Cash allocations rose 1%, to 15.9%. This was the largest allocation to cash since November 2014 (16.8%). April was the 42nd consecutive month with cash allocations below their historical average of 24%.

The five-month high in cash allocation occurred as neutral sentiment (as measured by the weekly AAII Sentiment Survey) has stayed at or above 45% for four consecutive weeks. This is the longest such streak since 1989. Despite the higher allocation to cash, equity allocations remain above average as the major indexes remain near their record highs and bond yields are at low levels.

April AAII Asset Allocation Survey results:

  • Stocks and Stock Funds: 67.9%, down 0.7 percentage points
  • Bond and Bond Funds: 16.2%, down 0.3 percentage points
  • Cash: 15.9%, up 1.0 percentage points

April AAII Asset Allocation Details:

  • Stocks: 32.2%, down 0.6 percentage points
  • Stock Funds: 35.7%, down 0.1 percentage point
  • Bonds: 3.3%, down 0.6 percentage points
  • Bond Funds: 12.8%, up 0.3 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 Members Describe Shifts in Their Stock Investing Strategies

Posted on April 30, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members how, if at all, they have changed their stock investing strategy recently. More than a quarter of all respondents (27%) said they have not made any change. About 18% are placing a bigger emphasis on targeting large-cap and dividend-paying stocks. Nearly 13% said they have raised their cash allocations. Close to 12% are focusing more on foreign stocks and funds, while 8% are focusing more on small-cap stocks.

Here is a sampling of the responses:

  • “I have moved into all large-cap with a bias towards value.”
  • “U.S. stocks seem priced for perfection, while overseas and emerging markets have been pretty beaten up.”
  • “Small-cap companies are less affected by the stronger dollar.”
  • “I’m taking profits where I have gains, and sitting on cash for an opportunity to buy dividend-paying stocks at a lower price.”
  • “No change. I review and change my portfolio, if needed, once a year.”


AAII Sentiment Survey: Neutral Stays High, Pessimism Falls

Posted on April 30, 2015 | AAII Survey

Neutral sentiment is above 45% for a fourth consecutive week, while pessimism is down to a two-month low in the latest AAII Sentiment Survey. Bullish sentiment declined as well, but stayed within its recent range.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 0.6 percentage points to 30.8%. The decline puts optimism below its historical average of 39.0% for an eighth consecutive week, the longest such streak since June 19, 2014, through August 7, 2014.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 1.9 percentage points to 47.2%. The increase keeps neutral sentiment at or above 45% for the fourth consecutive week, the longest such streak since December 16, 1988, through January 6, 1989. It also keeps neutral sentiment above its historical average of 30.5% for the 17th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, fell 1.2 percentage points to 22.0%. This is the lowest amount of pessimism registered by our survey since February 26, 2015 (20.3%). It is also the 14th week this year with a bearish sentiment reading below its historical average of 30.5%.

Neutral sentiment continues to be at an unusually high level. Historically, such readings have been correlated with better-than-average market performance over the following six- and 12-month periods. (See Analyzing the AAII Sentiment Survey Without Hindsight in the June 2014 AAII Journal for more information.) There is no guarantee history will repeat itself in the future, however.

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

This week’s AAII Sentiment Survey results:

  • Bullish: 30.8%, down 0.6 percentage points
  • Neutral: 47.2%, up 1.9 percentage points
  • Bearish: 22.0%, down 1.2 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 Weigh In on NASDAQ Rise

Posted on April 23, 2015 | AAII Survey

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

Here is a sampling of the responses:

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


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