AAII Survey: Two-Thirds of Retail Investors See the S&P 500 Up Over the Last Three Quarters of 2019

The S&P 500 index finished the first quarter of 2019 with a 13.1% price gain (excluding dividends). According to S&P Dow Jones Indices, this was the best first-quarter return for the large-cap index since the 13.5% price gain it posted in the first quarter of 1998. The main driver was the 7.9% gain the index saw in January, which was the best start to a year since 1987 (13.2%). The index then logged its 10th-best February since 1987 with a 3.0% gain. In March, the upward momentum slowed further, posting a 1.8% price return, making it the 15th-best March since 1987.

As of the close on April 5, the S&P 500 stood 1.3% below its all-time high close of 2,930.75 set on September 20, 2018. It won’t be surprising if this serves as a resistance point in the near term. A definitive resolution to the U.S.-China trade talks could serve as a catalyst, though, as would confirmation that the U.S. economy is still strong. One piece of that puzzle was the U.S. job market, which rebounded in March after a disappointing February fueled fears of a slowdown. Nonfarm payrolls increased a seasonally adjusted 196,000 in March after adding a paltry 33,000 in February.

AAII Weekly Survey Question

While the first quarter was strong for the U.S. stock market, the momentum faded in February and March. There is also a lot of political and economic uncertainty that could rein in the market in the coming months.

With these factors in mind, last week’s survey question asked:

With the first quarter of 2019 behind us, what is your 2019 performance prediction for the S&P 500?

Here are the results:

In all, 1,736 readers participated.

Roughly two-thirds of readers (67%) see the S&P 500 gaining more than 5% the rest of the year. Thirty-nine percent think the index will manage another 6% to 10% gain for the rest of 2019 and nearly one-quarter (24%) see the index adding another 11% to 20% before the year is finished.

Twenty-seven percent of readers see the S&P 500 ending the year relatively flat—in a range from down 5% to up 5%.

Only 9% of readers think the market will end the year down more than 5% while the remaining 4% see the market catching fire over the last three quarters of 2019 and adding 20% or more.

Weekly Special Question

Given the strong start to 2019, it wouldn’t be surprising if investors’ attitudes about the market’s near-term prospects changed. To get a better understanding of whether our readers’ outlooks for the market have changed, last week’s special question asked:

How has your outlook for the stock market over the next 12 months changed since the start of the year?

In all, we received 185 responses.

Nearly 38% of respondents say their outlook for the market over the next 12 months has not changed since the start of the year.

Thirty-four percent of readers say their outlook for the market for the next 12 months has improved since the start of 2019.

Nearly one-quarter (23%) say they have become more bearish when it comes to the market over the next 12 months since the start of the year.

Here is a sampling of the responses we received as to whether readers’ outlooks for the stock market for the next 12 months have changed since the start of 2019:

• “I am surprised that the American economy has managed to withstand the Trump administration’s mismanagement and misunderstanding of basic economics and the global economy.”
• “I still believe the market is due for a substantial correction for the last 12 to 18 months.”
• “I have become more pessimistic because [corporate] earnings are slowing.”
• “I am definitely more bearish and now expecting the market basically to tread water. Too much chaos with tariffs, European malaise and corporate profits coming down from the sugar high of last year’s tax cut.”
• “The good first-quarter start suggests moderation for the rest of the year. I do expect some reduction in trade tariffs in 2019, which should help international stocks.”

Everybody has an opinion! Why not give us yours? Participate in our weekly member poll, updated every Monday, and see the results online at www.aaii.com/memberquestion.