Investors Split on Being Most Influenced by Interest Rates, Earnings Growth or Tax Cuts

This week’s Sentiment Survey special question asked AAII members which factors are most influencing their six-month outlook for stock prices. The possibility of higher interest rates or the direction of interest rates in general topped the list, named by 18% of respondents. Earnings, particularly earnings growth, was second, listed by 17% of respondents. A close third was tax cuts, named by just under 17% of respondents. Some AAII members said tax cuts will boost earnings, while others expressed uncertainty or skepticism about their impact. Almost 10% of respondents discussed the correction. Some thought it was overdue, some thought it was just a temporary drop, while a few thought it could be a sign of lower prices to come. Also mentioned were concerns about the federal debt, politics and valuations. The majority of respondents listed more than one factor.

Here is a sampling of the responses:

  • “Tax cuts will translate into higher corporate profits.”
  • “I think we will recover from last week’s panic, especially as earnings and other economic indicators remain strong.”
  • “Inflation, interest rates and unexpected world events.”
  • “Equal force at present: Rising rates, inflation and central bank balance sheets versus earnings growth and fundamentals.”
  • “Politics, earnings and interest rates.”

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