The AAII Sentiment Survey for the Frame Ended 16 November 2016

The AAII Sentiment Survey for the Frame Ended 16 November 2016

The AAII Sentiment Survey for the Frame Ended 16 November 2016

$DIA, $SPY, $QQQ, $VXX

The AAII Investor Sentiment Survey measures the percentage of individual investors who are Bullish, Bearish, and Neutral on the US stock market for the next 6 months,

The AAII Investor Sentiment Survey has become a widely followed measure of the mood of individual investors. The weekly survey results are published in financial publications and are widely followed by market strategists, investment newsletter writers and other financial professionals.

Data represents what direction members feel the stock market will be in next 6 months.

Investor Update: Optimism fell to a low mark not seen since last June.

This week’s results:

Bullish: 46.7%, + 7.8 points
Neutral: 26.8%, – 5.0 points
Bearish: 26.6%, – 2.8 points
Historical averages:

Bullish: 38.5%
Neutral: 31.0%
Bearish: 30.5%

Commentary

Optimism about the short-term direction of stock prices continues to rise, reaching its highest level in 21 months. At the same time, Neutral sentiment fell to a 2-year low in the latest AAII Sentiment Survey. Pessimism is also lower.

Bullish sentiment

Expectations that stock prices will rise over the next 6 months, jumped 7.8% to 46.7%. Optimism was last higher on 18 February 2015 (47.0%).  The rise keeps optimism within its typical range, but above its historical average of 38.5%.

Neutral sentiment

Expectations that stock prices will stay essentially unchanged over the next 6 months, fell 5.0% to 26.8%. This is the lowest Neutral sentiment has been since 12 November 2014 (22.8%). The drop puts Neutral sentiment below its historical average of 31.0% for the 1st time in 42 weeks.

Bearish sentiment

Expectations that stock prices will fall over the next 6 months, declined by 2.8% to 26.6%. Pessimism was last lower on 17 August 2016. The historical average is 30.5%.

During the past 2 weeks, optimism has risen by a cumulative 23.0%—the 14th largest such move in the 29-year history of this survey. At the same time, Neutral sentiment has fallen by a cumulative 15.3%, the 20th largest such drop.

Optimism and Neutral sentiment are currently both within their historical ranges.

There is not a clear trend as to how the market has performed following unusually large 2-week increases in Bullish sentiment.

The median 6-month gain for the 13 periods when there was a larger 2-week increase in optimism was 5.9%. Though above the historical median for all periods, the number is skewed upward by a 34.5% gain following the 2 week, 26.1% increase in optimism on 19 March 2009.

The big shift in sentiment started in the days leading up to the election and has continued since.

Though some individual investors are optimistic about President Elect Donald Trump, others are uncertain or pessimistic, as the responses to this week’s special question show.

At the same time, the stock market has rebounded strongly from its Autumn lows, with the

DJIA setting new record highs. This has likely alleviated some concerns about a larger drop in stock prices occurring over the short term.

This week’s special question asked AAII members what factors are most influencing their 6-month outlook for stocks now that the elections are over. Not surprisingly, many said president-elect Donald Trump.

Slightly more than 25% respondents described themselves as being uncertain about the impact his presidency will have or did not specifically state a positive or negative bias. Many of the respondents are waiting to see what policies he puts into action and the impact of those policies.

Approximately 22% are pleased with the election with Donald Trump, particularly the prospects of tax cuts, deregulation and/or the repeal of the Affordable Care Act aka Barack Obamacare.

About 5% have a negative view, with some fretting about the impact Donald Trump may have on the economy and trade.

Beyond Donald Trump, 18% of respondents are focused on the Fed and the possibility of higher interest rates.

Corporate earnings were cited by 9% of respondents, the economy by 8%, and 3% are focused on valuations. Some respondents listed more than 1 factor.

By Charles Rotblut, CFA

Paul Ebeling, Editor

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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