(AP Photo/Richard Drew)
Optimism among individual investors about the short-term direction of the stock market rebounded modestly. The latest AAII Sentiment Survey also shows small drops in neutral and bearish sentiment.
Bullish sentiment, expectations that stock prices will rise over the next six months, rose 1.9 percentage points to 33.9%. Optimism is below its historical average of 38.0% for the 40th time in the past 52 weeks.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, declined 0.3 percentage points to 30.9%. The historical average is 31.5%. Bearish sentiment, expectations that stock prices will fall over the next six months, pulled back by 1.6 percentage points to 35.2%. The historical average is 30.5%.
All three indicators are currently within their typical historical ranges.
The coronavirus outbreak is dampening the economic outlook for some but not all individual investors as the responses to this week’s special question show. Also affecting individual investor sentiment is the market’s upward trend, the phase-one trade deal between the U.S. and China, the November elections, Washington politics, earnings growth, monetary policy, the economy and valuations.
For this week’s special question, we asked AAII members if the coronavirus is impacting their outlook for the economy. A little less than half of all respondents (47%) say the coronavirus is impacting their economic outlook. A majority in this group cite that stagnant manufacturing in China related to the coronavirus will impact many companies’ supply chain systems. Additionally, many in this group expect the adverse impact to be short-lived. On the other hand, 42% of respondents state that the coronavirus is not impacting their outlook for the economy. Many in this group state that China will experience most of the negative effects related to the outbreak. Finally, 11% of respondents state that it’s too early to tell how the virus might impact the economy.
Here is a sampling of the responses:
- “I believe the coronavirus (novel) outbreak will have a short-term effect on the world economy. Thus, it has the possibility of creating some value opportunities as investors overreact to the outbreak.”
- “If you are well diversified, it doesn’t really matter. There is always a crisis of some sort going on.”
- “I think it may impact China slightly, but to the rest of the world it will be fleeting news. I am amazed at China’s ability to build two hospitals and staff them in 10 days—Wow!”
- “Yes, it will slow production and other work in at least China for the foreseeable future. This will impact trade and supply chains for months. Remember the flu epidemic from 100 years ago.”
As of February 6, 2020
American Association of Individual Investors
This week’s AAII Sentiment Survey results:
- Bullish: 33.9%, up 1.9 percentage points
- Neutral: 30.9%, down 0.3 percentage points
- Bearish: 35.2%, down 1.6 percentage points
- Bullish: 38.0%
- Neutral: 31.5%
- Bearish: 30.5%
The AAII Sentiment Survey has been conducted weekly since July 1987. The survey and its results are available online.
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