Thursday, May 15, 2014

Investors Losing Their Optimism

After the huge year put up by the markets in 2013, investors came into this year full of further enthusiasm. A survey of investors conducted by the American Association of Individual Investors just before the beginning of this year found that 55.1 percent of them expected stocks to rise over the next six months.

Stocks have risen in the ensuing period - the S&P 500 is up by about 2.5 percent over that time frame - but not by enough to reassure investors. The number of optimistic investors has dropped to 28.3 percent in the most recent version of that survey. For the sake of reference, the average figure in this survey since 1987 has been that 38.9 percent of investors tend to feel bullish at any one time.

It's also worth noting that many professional investors treat this as a contrarian indicator.  Individual investors tend to get the market's moves wrong more than they get it right, so investor pessimism is often considered a positive sign.

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