Half of Investors Believe Market Rebound Will Be Short-Lived

In this week’s Sentiment Survey special question, we asked AAII members to share their thoughts about the stock market’s rebound from its March lows. Half (50%) of respondents say they think this rebound will be short-lived. Rationale of this group includes the unsustainability of an economic recovery unless a coronavirus vaccine is discovered. This compares to 31% of respondents who say that the market recovery makes sense given the Federal Reserve’s recent efforts to boost liquidity. Similar to the first group, a majority of these respondents state that they believe the market recovery will be unsustainable without a vaccine and/or a return to normalcy. Additionally, 19% of respondents state that the upward move demonstrates growing investor optimism that the stay-at-home orders will soon be lifted.

Here is a sampling of the responses: 

• “I believe the rise in the market is due to liquidity from the Fed and positive sentiment from reopening the economy. I worry that the economy (individuals & small businesses) has been hurt so badly and is now so far behind that it will struggle to improve.”
• “I am amazed that there is such a disconnect between the market and the state of the country. Sooner or later the market will reflect the coronavirus pandemic and the impending economic recession.”
• “I hope the rebound continues, but I think it’s short-lived. There are too many overly optimistic expectations about how future earnings growth is priced into these ‘rebounded prices.’”
• “Markets are forward-looking: There’s unprecedented assistance coming from the Fed, most job cuts likely are temporary (furloughs) and the Trump administration will do all that is necessary to ensure reelection. Thus, a rebound from March is not surprising. Of course if the second wave of the coronavirus arrives, then the market will tank again in anticipation of bad news.”

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