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Sunday, March 29, 2020 2:14:39 PM
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased by a slight 0.5 percentage points to 15.0%. Neutral sentiment remains below its historical average of 31.5% for the 10th time in 11 weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, increased 0.9 percentage points to 52.1%. Pessimism is above 50% for three consecutive weeks for the first time since February 19, 2009, through March 5, 2009. The historical average is 30.5%.
Neutral sentiment is at an extraordinarily low level for the second consecutive week. This week’s neutral sentiment ties with August 7, 1987, and July 13, 2000, for the 29th lowest out of more than 1,700 weekly results.
Pessimism continues to be at an unusually high level (more than one standard deviation above the historical average). Historically, unusually high levels of bearish sentiment have had a weaker association with above-average returns for the S&P 500 index over the following six- and 12-month periods than unusually low levels of optimism. (Bullish sentiment remains within its typical historical range.)
The continued high level of pessimism reflects the ongoing bear market, the coronavirus pandemic and, to a lesser extent, the oil price cut announced by Saudi Arabia. Many—but not all—individual investors are using the downturn to look for buying opportunities among stocks. Other factors influencing AAII members’ sentiment include the November elections, corporate earnings, economic growth and valuations.
For this week’s special question, we asked AAII members which industries or sectors they think are attractive buying opportunities in the current market environment. More than one out of four (27%) respondents say that the technology sector presents attractive buying opportunities. Other sectors named include health care (25%), consumer staples (14%), utilities (14%), financials (9%) and industrials (5%).
Overall, many respondents, regardless of which sector they named, stated that steady streams of cash flow and unwavering demand make these sectors more appealing than others. Additionally, 7% of respondents state that the consumer discretionary sector has several bargain opportunities. Many in this group specifically named travel, online retail and entertainment companies. They believe that this sector is highly undervalued in the current environment.
Here is a sampling of the responses:
“Consumer non-durables with dividend yields. Speculate in grocery stores as restaurants are put out of business. Online shopping companies like Amazon in an environment where people are afraid to go out.”
“Grocery stores, streaming companies like Netflix or Disney and home gym apparatuses. Their bump is likely going to be short term. Bottom fishing would include airlines like Boeing or hotels.”
“No particular sectors. Everything is beaten down. Lots of potentially good buys regardless of sector.”
“Tech companies that have anything to do with working remotely. Some retailers like Costco, Target, Walmart and Amazon; streaming services Netflix, YouTube TV, Sling.”0
https://www.aaii.com/sentimentsurvey
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