Buck Conventional Wisdom When Taking Retirement Withdrawals
Posted on April 16, 2015 | Investor Update
You can extend how long your retirement savings last by bucking the conventional wisdom on how to take withdrawals. Even if you are not in retirement yet, you will want to pay attention because the strategy may impact your decisions about what retirement savings accounts to maintain and contribute to.
The Impact of Global Events on Market Outlook
Posted on April 16, 2015 | AAII Survey
This week’s Sentiment Survey special question asked AAII members what, if any, global events are influencing their six-month outlook towards the stock market. Responses varied, with several members listing more than one event. More than one in five (22%) respondents said that events in the Middle East are having an impact. Ongoing instability was the primary factor, though several respondents mentioned the framework for a possible deal with Iran. About 19% of respondents said that Europe is influencing their outlooks, particularly its rate of growth. The stronger U.S. dollar is influencing the outlooks of 15% of all respondents. A nearly equal number, about 11% each, said that the global economy and central bank policies are having an impact on their expectations for the stock market.
Here is a sampling of the responses:
- “Economic stimulus measures overseas may help to offset a fully to slightly overvalued U.S. market.”
- “Growing unrest in the Middle East.”
- “Iranian nuclear accord reaching finalization.”
- “The continuing strength of the U.S. dollar.”
- “The European Union economy seems to be stabilizing thanks to accommodative monetary policy.”
AAII Sentiment Survey: Neutral Sentiment Above 45% for a Second Week
Posted on April 16, 2015 | AAII Survey
The proportion of individual investors describing their six-month outlook for stocks as neutral is above 45% for a second consecutive week for the first time in more than 26 years. Optimism rebounded back above 30%, while pessimism declined.
Bullish sentiment, expectations that stock prices will rise over the next six months, rebounded by 3.4 percentage points to 32.1%. Even with the upward move, optimism is below its historical average of 39.0% for the sixth consecutive week.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 2.0 percentage points to 45.1%. This is the first time neutral sentiment has stayed at or above 45% on consecutive weeks since January 20 and January 27, 1989. (Neutral sentiment was 47.0% and 49.0%, respectively, on those dates.) This week is the 15th 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, declined 1.4 percentage points to 22.8%. This drop puts bearish sentiment at a seven-week low. The historical average is 30.5%.
Seeing neutral sentiment stay at or above 45% is very unusual, though it did it reach and hold even higher levels throughout 1988. 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.
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, recent price volatility, geopolitical events, the pace of economic growth, the impact of the stronger dollar in earnings growth and worries that a notable decline in stock prices could occur.
This week’s AAII Sentiment Survey results:
- Bullish: 32.1%, up 3.4 percentage points
- Neutral: 45.1%, down 2.0 percentage points
- Bearish: 22.8%, down 1.4 percentage points
- 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.
Sell OF THE WEEK 4/15/2015
Posted on April 15, 2015 | Podcast
AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Tech Data Corp. (TECD) is his “Sell 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: Sell of the week
A Spring Bounce
Posted on April 15, 2015 | Model Portfolios
Spring is in the air as temperatures warm up to a tolerable level here in Chicago. The S&P 500 index’s total return was down 1.6% for March, fairly typical of index performance for the month.
The Model Fund Portfolio was flat for the month, declining only 0.1%, while the Model Shadow Stock Portfolio, which invests in micro-cap value stocks, gained 4.6%.
The Model Shadow Stock Portfolio’s 4.6% increase for March handily beat both of its comparison benchmarks: The Vanguard Small Cap Index fund (NAESX) gained 1.2% and the DFA US Micro Cap Index fund (DFSCX) gained 2.3% in March. Year to date, the Shadow Stock Portfolio has gained 5.5%, while the NAESX is up 4.7% and the DFSCX is up 3.1% over the same time period. Since its inception in 1993, the Model Shadow Stock Portfolio has a compound annual average return of 17.0%, while the Vanguard Total Stock Market Index fund (VTSMX) has gained 9.4% annually over the same period.
The Model Fund Portfolio’s 0.1% decline in March compared to a 1.0% decrease for the Vanguard Total Stock Market Index fund. Since its inception in June of 2003, the Model Fund Portfolio has a compound annual average return of 9.3%, slightly trailing the Vanguard Total Stock Market Index fund over the same time period, which gained 9.5%.
AAII WEEKLY FEATURES 4/14/2015
Posted on April 14, 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.
BUY OF THE WEEK 4/14/2015
Posted on April 14, 2015 | Podcast
AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Chesapeake Energy Corp. (CHK) 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
Mergers and Acquisitions Hit Record High
Posted on April 10, 2015 | Dividend Investing
We have commented on the fact that companies have shown an increase in cash balances over the last year. In fact, cash and short-term investments in the S&P 500 (ex-financials) settled at a record high at the end of 2014. The majority of companies are using this additional cash to increase share buybacks and dividend payments, which have also hit record levels. So far this year what we are seeing is an increase in mergers and acquisitions (M&A).
Jumping Merger Activity Snags SSR Holding
Posted on April 10, 2015 | Stock Superstars Report
Mergers and acquisitions (M&A), which are up 25% year over year, grabbed the headlines again this week as several large deals were announced.Seven years removed from the financial crisis, the aftereffects have mostly faded and companies have regained the confidence to make acquisitions
The Growing Popularity of Index Funds
Posted on April 9, 2015 | Investor Update
Is there too much money going into index funds?
This is a common question I have heard raised at conferences and other industry events. It’s being raised because of the growth of Vanguard and, secondarily, the growth of exchange-traded fund.