More AAII Sentiment

As we noted last week, Sentiment was pretty neutral as the market tore higher (Sentiment Reading: Neutral).

Have a look at the AAII Asset Allocation Chart is below. It suggests assets are being re-allocated back into equities, however the allocation still remains historically low, which suggests liquidity on the sidelines is still high and can power stocks higher for some times (especially absent a slow offerings calendar). >

click for bigger graph asset-allocation.png >

The second chart, AAII bearish sentiment, which scored a huge contrarian buy signal in early March — as big as the one after the 1987 crash — when it hit 70% of respondents to the survey were bearish. It has since moderated, however, and is not at levels yet that would be deemed a negative for stocks.

click for bigger graph sentiment-surveys.png


Originally published at The Big Picture blog and reproduced here with the author’s permission.

One Response to "More AAII Sentiment"

  1. Irondoor   May 15, 2009 at 1:23 pm

    Barry says, “the low allocation to stocks meant money moved to cash”. Assume you started the year 2008 with a typical 60/40 allocation strategy and an account value of $100,000. Your $60,000 stock valuation is now roughly $36,600 (down 39%) and your average bond allocation of $40,000 is now worth around $42,000 including interest. Your total account is down to $78,600 (-21%)even after the big rally off the March bottom.The equity allocation is now 46.6% (very near the 42% cited by Barry). Not because the money “moved to cash”, but because it evaporated in the equity bear market. If the investor did not buy or sell one single share of stock or bond over the 17 month period, how did he change his allocation? He didn’t; the market did it for him. To get back to the 60/40 allocation, he would have to sell bonds and buy stocks. Or maybe just sell bonds and take the money off the table.