S&P 500 Weekly Update: Investor Sentiment - By One Metric - Is Still Horrid

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Includes: BXUB, BXUC, CAPX, DHVW, DMRL, EPS, FTA, IVE, IVV, IVW, PPLC, RPG, RPV, RSP, RVRS, RYARX, SDS, SFLA, SH, SPDN, SPLX, SPUU, SPVU, SPXE, SPXL, SPXN, SPXS, SPXT, SPXU-OLD, SPXV, SPY, SPYG, SPYV, SSO, UPRO, USMC, VFINX, VOO, VOOG, VOOV
by: Brian Gilmartin, CFA

The American Association of Individual Investors (AAII) puts out a weekly investor sentiment survey, and this week, the AAII investors that voted themselves as being bullish on the market totaled a whopping 32%.

Here is the summary data:

  • AAII % bullish: 32%
  • AAII neutral: 35.9%
  • AAII bearish: 32%

Think about the above data. We've been in a bull market for 10 years since the bear market low, or five years if you measure from when the 2000 and 2007 highs of 1,550 were taken out in May 2013.

Here is the wrinkle though. I've often wondered if the AAII survey has lost its relevance as a sentiment indicator. I subscribed to AAII in the mid-80s for a while. The average age of its readership could be substantially older than the average TheStreet, or StockTwits or Josh Brown reader on Twitter.

The newsletter writers tend to be more bullish, as they should be in my opinion.

This blog has made a couple of attempts to talk about market sentiment: here and here.

Sentiment - to me anyway - still seems unduly bearish.

S&P 500 Earnings data (Source: Thomson Reuters TWIE):

  • Fwd 4-qtr est: $169.07 vs. last week's $169.10
  • PE ratio: 17.3x
  • PEG ratio: 0.76x
  • S&P 500 earnings yield: +5.77% vs. +5.82% last week
  • Year-over-year growth of fwd est: +22.92% vs. last week's +22.87%

The year-over-year growth of the forward estimate continues to expand or grow, which is always a positive.

Thomson Reuters IBES provides the forward estimate every week, but this blog has tracked it for years.

Here is the forward progression of full-year "calendar" S&P 500 EPS estimates:

  • 2020: $194.82 for expected 9% S&P 500 EPS growth in calendar 2019
  • 2019: $178.86 for expected 10% S&P 500 EPS growth in calendar 2019
  • 2018: $162.19 for expected 23% S&P 500 EPS growth in calendar 2018

You can see how earnings growth is expected to return to a more normal historical growth rate next year, when it will lap the tax cuts.

Thanks for reading.