AAII Sentiment Survey: Neutral Sentiment Spikes to a 12-Year High

Posted on April 9, 2015 | AAII Survey, Investing

Neutral sentiment spiked to a 12-year high in the latest AAII Sentiment Survey. The percentages of individual investors describing themselves either bullish or bearish fell.

Bullish sentiment, expectations that stock prices will rise over the next six months, fell 6.7 percentage points to 28.7%. This is a three-week low. The drop puts optimism 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, surged by 14.5 percentage points to 47.2%. Neutral sentiment was last higher on February 6, 2003 (51.4%). This week’s jump puts neutral sentiment above its historical average of 30.5% for the 14th consecutive week.

Bearish sentiment, expectations that stock prices will fall over the next six months, pulled back by 7.8 percentage points to 24.1%. The historical average is 30.5%.

Not only is neutral sentiment at an unusually high level, it is at an unusually high level for the third time in five weeks. Historically, unusually high levels of 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 in the future, however.

During the past five weeks, there have been notable swings in all three sentiment indicators. Bullish sentiment has fluctuated within a 10-percentage-point range, neutral sentiment has moved within a 14.5-percentage-point range and bearish sentiment has swung within nearly an eight-percentage-point range. The up and down movements have occurred as stock prices have been more volatile, the odds of an interest rate hike occurring sooner rather than later have increased and projections for first-quarter earnings have been reduced.

Keeping some AAII members encouraged is 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, disappointing earnings or guidance from certain companies, geopolitical events, the pace of economic growth and worries that an even larger decline in stock prices could occur.

This week’s AAII Sentiment Survey results:

  • Bullish: 28.7%, down 6.7 percentage points
  • Neutral: 47.2%, up 14.5 percentage points
  • Bearish: 24.1%, down 7.8 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.



AAII Sentiment Survey: Pessimism Jumps to a Two-Month High

Posted on April 2, 2015 | AAII Survey, Investing

Pessimism about the short-term direction of stock prices rose to a two-month high in the latest AAII Sentiment Survey. AAII members grew more cautious overall, as fewer members anticipated price increases or flat markets over the next six months. All three sentiment indicators are well within their typical historical ranges, however.

Bullish sentiment, expectations that stock prices will rise over the next six months, pulled back by 3.0 percentage points to 35.4%. The decline puts optimism below its historical average of 39.0% for the fourth consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, fell 4.5 percentage points to 32.6%. This is an eight-week low. Even with the drop, neutral sentiment is 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, rebounded by 7.6 percentage points to 32.0%. The rise puts pessimism at its highest level since February 5, 2015, and above its historical average of 30.5%.

The comparatively higher level of volatility in stock prices this year has contributed to notable swings in the sentiment readings. For example, neutral sentiment has fallen by a cumulative 10.4 percentage points over the past three weeks after rising to a 10-month high of 43.0% on March 12, 2015.

In addition to the recent price fluctuations, prevailing valuations, concerns about the market reaction to a potential forthcoming interest rate hike, worries that an even larger decline in stock prices could occur and the pace of economic growth are weighing on some AAII members’ short-term market outlook. Keeping other AAII members encouraged is sustained economic expansion, still-accommodative monetary policy, a lack of investment alternatives to stocks and the ongoing bull market.

This week’s AAII Sentiment Survey results:

  • Bullish: 35.4%, up 3.0 percentage points
  • Neutral: 32.6%, down 4.5 percentage points
  • Bearish: 23.0%, up 7.6 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.



How to Set and Revise Realistic Price Targets for Your Stocks

Posted on January 30, 2015 | Investing

An investor over time attaches some validity to his or her initial price objective, meaning that modifying that expectation becomes difficult for reasons totally contained only between one’s ears.

But stocks go where they want to, despite what any participants think is justified and despite what investors might wish would happen. Investors unable or unwilling to let go of original price opinions are doomed to lose, either through losses in positions that never come back, and/or from better opportunities elsewhere that have been lost.

There are two primary ways that investors get into trouble when setting price objectives:

The initial idea, including the selling-price objective, may have been wrong from the start.
If correct at first, the original idea can become outdated and, therefore, inaccurate as subsequent events transpire.

How, then, does one develop a realistic price target?

As we shall see in this article, selling-price targets should be based on logical analysis, which includes several dimensions and several elements. Hope, an emotion, is absolutely not a valid part of investment decisions (to buy, sell, or hold), and should never play any part in setting a realistic exit target. Price goals based even in part on a position’s original cost basis should be avoided, since they are based on the hopes of not losing money and of being able to feel happy or smart. That being said, however, investing is an art rather than a science, so investors should work diligently to do well, but not agonize over the impossibility of achieving perfect results.

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Top Charting Web Sites

Posted on October 14, 2014 | Investing

The FreeStockCharts site (formerly BestFreeCharts) is a relative newcomer to the online charting arena, but has already made quite an impression on us. From Worden Brothers, the maker of the popular TC2007 charting software, the site offers charting, scanning, and portfolio tracking on a free and fee-based basis. The site is unique in that it offers free streaming “real-time” charts of stocks, exchange-traded funds (ETFs), indexes, and forex (foreign exchange) without exchange fees. It does this by providing real-time data from the BATS (better alternative trading system) exchange.

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How Should PIMCO Fund Shareholders React to the Departure of Bill Gross?

Posted on September 26, 2014 | Investing, Quarterly Mutual Fund Update
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“Bond king” Bill Gross is leaving PIMCO, a company he co-founded, to join Janus Capital Group (JNS). Our mutual fund guide shows Gross as the lead manager on eight PIMCO mutual funds. Our exchange-traded fund (ETF) guide shows Gross as the lead manager on one PIMCO ETF. The Closed-End Fund Association’s website shows Gross managing two close-end funds. It is possible that there are institutional funds that Gross manages as well. A list of funds managed by Gross that are readily available to individual investors is displayed below.

If you own shares in a PIMCO fund managed by Gross, the big question is what should you do now? In situations when a manager leaves, the best move can be to sit tight and monitor the situation. If the fund(s) still meets your criteria for buying it, then don’t make a kneejerk reaction. Rather, see who takes over the fund and how that manager (or group of managers) performs relative to their category peers. Though likely to be less outspoken, the new manager(s) may prove to be as talented as or even more talented than Gross. They could also be worse. Until actual results begin to appear, nobody knows with any certainty how the funds will perform.

I realize that the advice to sit and monitor the situation can seem tough to follow. If you are uncomfortable doing so, go through the data in our fund guides. Look at the long-term performance of comparable funds, paying attention not only to the recent top performers, but also to those funds that have been able to best their peers over several years without experiencing considerably higher levels of volatility in their year-by-year returns. When doing this, be aware that bond market conditions going forward are likely to be different than they have been over the last five or 10 years. Pay attention to manager tenure, since the returns of a past manager don’t tell you how the new manager will perform. Don’t forgot to review the expense ratios as well, since every dollar spent on fees is a dollar you will never see again.

PIMCO Mutual Funds Managed by Bill Gross:

  • PIMCO Fundamental IndexPLUS Absolute Return (PIXDX)
  • PIMCO StocksPLUS Absolute Return (PSTDX)
  • PIMCO Small Cap StocksPLUS Absolute Return (PCKDX)
  • PIMCO StocksPLUS Absolute Return Short Strategy D (PSSDX)
  • PIMCO Low Duration (PLDDX)
  • AMG Managers Total Return Bond (MBDFX)
  • PIMCO Total Return (PTTDX)
  • PIMCO Unconstrained Bond (PUBDX)

PIMCO ETFs Managed by Bill Gross:

  • PIMCO Total Return ETF (BOND)

Closed-End Funds Managed by Bill Gross:

  • PIMCO Corporate & Income Opportunity Fund (PTY)
  • PIMCO High Income Fund (PHK)


Online Discount Brokers

Posted on August 8, 2014 | Investing

As a member of AAII and reader of Computerized Investing, chances are that you perform a significant amount of investing on your own. Though individual investors still call full-service brokers to place trades, many have now switched to fully using online discount brokerages. These online brokers have a number of advantages over “traditional” brokers, such as cost and convenience, and they are constantly evolving and improving. Most online discount brokerages charge $10 or less per trade, but there are some online deep discount brokerages that charge just a few dollars per trade.

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Offbeat Offerings: Mortgage-Backed Securities

Posted on May 20, 2014 | Investing

The current housing market decline, increasing mortgage defaults and the financial struggles at Fannie Mae and Freddie Mac have shined a spotlight on a particular fixed-income product that is often not particularly well-understood by individual investors—mortgage-backed securities.

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Where Credit Is Due: A Look at the Ratings

Posted on April 4, 2014 | Investing

There are many factors that individuals must consider when making investments in fixed-income securities. Current bond yields, current bond prices, and current as well as future interest rates all may have a big impact on the return of a fixed-income investment.

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The Dividend Yield: Stock Mutual Funds and ETFs That Generate Income

Posted on February 26, 2014 | Investing

Are you looking for an investment that has the potential to produce a growing income stream and long-term capital appreciation along with reasonable risk? Bond funds won’t suffice; their income is a prisoner of prevailing interest rates, and their capital appreciation in the long term is essentially zero, a combination that is exposed to inflation risk.

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How to Set and Revise Realistic Price Targets for Your Stocks

Posted on February 6, 2014 | Investing

An investor over time attaches some validity to his or her initial price objective, meaning that modifying that expectation becomes difficult for reasons totally contained only between one’s ears.

But stocks go where they want to, despite what any participants think is justified and despite what investors might wish would happen. Investors unable or unwilling to let go of original price opinions are doomed to lose, either through losses in positions that never come back, and/or from better opportunities elsewhere that have been lost.

Read more »



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