Investor Sentiment Index Hits 2014 Peak for Stocks

Monday, 25 Aug 2014 10:26 AM

By Dan Weil

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Individual investors apparently aren't worried that stocks continue to hit record highs, even though the S&P 500 index hasn't experienced a 10 percent correction since October 2011.

The American Association of Individual Investors (AAII) survey of its members for the week ended Wednesday showed that 46 percent are bullish on stocks for the next six months.

That's the highest level since Dec. 26 and up from 40 percent a week ago.

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

A total of 24 percent of respondents are bearish, the lowest since late June and down from 27 percent a week ago.

The S&P 500 hit a peak of 1,994.76 Thursday and closed at 1,988.40 Friday.

But stock bulls shouldn't get too excited over the AAII index: it's a contrarian indicator.

"While less than half of individual investors are bullish, we are getting close to that 50 percent threshold that has spelled short-term trouble in the past," Bespoke Investment Group analysts wrote on the firm's website.

It's not just retail investors who are enthusiastic about stocks.

"We’ve been able to breathe a sigh of relief that those worst-case scenarios have been avoided, at least for the time being," Ryan Larson, head of equity trading at RBC Global Asset Management, told The Associated Press.

He was referring to the economy and geopolitical turmoil.

Meanwhile, Bank of America Merrill Lynch has an indicator for stocks based on the sentiment of Wall Street strategists. The indicator shows that stocks move in the opposite direction of strategists' sentiment.

Strategists in the BofA survey currently recommend devoting just 51 percent of your portfolio to stocks, compared to an average of 60 percent over the last 15 years, The Wall Street Journal reports.

With bearishness at its current level, stocks have gained 98 percent of the time over the past 30 years, Savita Subramanian, chief U.S. stock strategist for BofA, told The Journal.

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

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