Market Conditions, Direction, Valuation Influencing Allocations

Posted on March 3, 2015 | AAII Survey

Last month’s Asset Allocation Survey special question asked AAII members what predominately influences their decision to increase or decrease their exposure to stocks and stock funds. Responses were mixed, with some members giving more than one reason. Market conditions were cited by about 19% of all respondents. A nearly equal number pointed to market direction (9%) as did valuation (8%). The attractiveness of equities or individual stocks were given as a reason by about 19% of all respondents as well. Many of these members cited expected returns as playing a role. Slightly more than 13% of all respondents said their age influences their allocation. Roughly 11% said economic conditions play a role, while 10% said they maintain or rebalance to a targeted allocation.

February AAII Asset Allocation Survey: Equity Allocations at 2nd Highest Level Since 2007

Posted on March 3, 2015 | AAII Survey

Last month, equity allocations within individual investors’ portfolios rebounded back to their second-highest level since the financial crisis. The February AAII Asset Allocation Survey showed a rise in stock and stock fund holdings, a decline in fixed-income holdings and no change in cash allocations.

Stock and stock fund allocations rebounded by 1.1 percentage points to 68.3%. This ties December 2013 for the second-highest allocation to equities since June 2007. Last month was also the 23rd consecutive month and the 25th out of the past 26 months with stock and stock fund allocations at or above their historical average of 60%.

Bond and bond fund allocations declined by 1.1 percentage points to 16.4%, a three-month low. Even with the decrease, bond and bond fund allocations remained at or above their historical average of 16% for the ninth consecutive month.

Cash allocations were unchanged at 15.3%. February was the 39th consecutive month with cash allocations below their historical average of 24%.

The increase in stock and stock fund allocations is not surprising given the background factors at play. The S&P 500 gained 5.5% last month and experienced its best February performance since 1998. Optimism in our weekly Sentiment Survey was above its historical average for most of the month as well. Bond yields, though rising in February, were at low levels at the end of January.

February AAII Asset Allocation Survey results:

  • Stocks and Stock Funds: 68.3%, up 1.1 percentage points
  • Bonds and Bond Funds: 16.4%, down 1.1 percentage points
  • Cash: 15.3%, unchanged

February AAII Asset Allocation details:

  • Stocks: 33.9%, up 2.9 percentage points
  • Stock Funds: 34.4%, down 1.8 percentage points
  • Bonds: 3.3%, up 0.2 percentage points
  • Bond Funds: 13.1%, down 1.3 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:



Posted on March 3, 2015 | Weekly Features


This week’s AAII Weekly Features has been updated.
View this week’s Top AAII Articles, Featured Stock Screen and Member Question.

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BUY OF THE WEEK 3/3/2015

Posted on March 3, 2015 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Steve Madden (SHOO) is his “Buy of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Buy of the week

A Key to a Lasting Retirement Portfolio

Posted on February 27, 2015 | AAII Journal

If you’re retired—or nearing it—ensuring that your retirement investment portfolio lasts your lifetime is critical. And that’s not easy because by nature the stock market is volatile. What if a market downturn takes a bite out of your investment portfolio?

While you cannot completely control the market’s impact on your portfolio, there are things you can control that can also make a significant difference in how long your portfolio may last. One: your withdrawal rate from your portfolio. The amount you take can directly impact how long your assets could last in retirement.

But what about in difficult markets? At Fidelity, we still believe in inflation-adjusted withdrawal rates of no more than 4% to 5% a year for individuals who retire at age 65. That’s because we did the analysis using our Retirement Income Planner and an inflation-adjusted withdrawal rate of more than 5% steeply increased the risk of depleting retirement savings during an investor’s lifetime. We also ran some further analysis to determine the influence of different market environments.

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February Dividends Close to Setting Records

Posted on February 27, 2015 | Dividend Investing

With fourth-quarter earnings season winding down (only about 10 members of the S&P 500 index are scheduled to report earnings next week), we thought it would be interesting to see how companies have fared overall.

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Record-Setting February Performance, Plus Changes to the Portfolio

Posted on February 27, 2015 | Stock Superstars Report

The March SSR Monthly Report is now available at the SSR website. There is one new portfolio deletion and one new portfolio addition to announce.

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A Reignited Debate About Protecting Investors

Posted on February 26, 2015 | Investor Update

Two events in Washington, D.C., this week reignited the debate about the responsibilities of those giving investment advice or operating retirement plans. The outcomes could influence what standards are used to determine if investors’ interests are being placed first.

On Monday, President Obama proposed tougher standards on brokers handling retirement funds. He called for requiring “retirement advisers to put their client’s best interest first, by expanding the types of retirement investment advice subject to ERISA.” ERISA is the Employee Retirement Income Security Act and expanding it would be mean stricter standards for brokers. Among the stricter standards that are part of Obama’s proposal is making advisers “abide by a ‘fiduciary’ standard.”

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Discomfort with Current Stock Valuations

Posted on February 26, 2015 | AAII Survey

This week’s Sentiment Survey special question asked AAII members about their comfort level with current stock valuations. Just under half of all respondents said stocks are either overvalued (33%) or somewhat/slightly overvalued (14%). Many who thought stocks were expensive described current valuations as being high relative to historical valuations. At the other end of the spectrum, 17% of respondents said they were either comfortable with current valuations or view them as being acceptable. Several of these respondents pointed to profit growth as the reason why. Slightly more than 10% said stocks are undervalued, while 5% said the answer depends on the industry or the stock being analyzed.

A common theme across answers was a lack of good alternatives for investment dollars. Several respondents thought stocks could continue to rise so long as interest rates stay low or profits continue to grow.

Here is a sampling of the responses:

  • “I think valuations are high, but they may stay that way for a considerable time.”
  • “Not very comfortable as the price-earnings ratio seems pretty high, but there is no other game in town besides equities.”
  • “Some stocks are getting too high; need to be selective and not buy the ‘market.’”
  •  “Stocks are undervalued due to the level of profits.”
  • “I’m fairly comfortable at current valuations as I think prices reflect trends in revenues and earnings.”
  • “The Shiller CAPE ratio is extremely high.”

AAII Sentiment Survey: Optimism Moderates, Remains Above Average

Posted on February 26, 2015 | AAII Survey

The percentage of individual investors describing their short-term outlooks for stock prices as either bullish or neutral moderated in the latest AAII Sentiment Survey. Pessimism rebounded, but remained at a low level.

Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.6 percentage points to 45.4%. Even with the pullback, this is the 25th out of the last 29 weeks that optimism is above its historical average of 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 0.8 percentage points to 34.3%. This week is the eighth consecutive week with neutral sentiment above its historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, reversed last week’s drop by rebounding 2.4 percentage points to 20.3%. Pessimism is right on the edge of what we consider to be an unusually low level. The historical average for bearish sentiment is 30.5%.

Although the major indexes rose for several consecutive days, bullish and neutral sentiment pulled back after recently setting near-term highs. As noted above, both measures continue to remain above their respective historical averages.

Keeping AAII members encouraged are the upward momentum of stock prices, comparatively low energy prices, earnings growth and sustained economic expansion. Causing other members to be cautious or pessimistic are prevailing valuations, disappointing earnings or guidance from certain companies, geopolitical events, the impact of lower oil prices on energy stocks, 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: 45.4%, down 1.6 percentage points
  • Neutral: 34.3%, down 0.8 percentage points
  • Bearish: 20.3%, up 2.4 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:

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