Over 40% of Investors See Market Pulling Back From Recent Highs

For this week’s Sentiment Survey special question, we asked AAII members to share their thoughts about the S&P 500 index setting further record highs this year. Approximately 43% of respondents state that they believe the market will pull back and not set new highs. Many in this group cite unsustainably high valuations as their reasoning. Conversely, 30% of respondents state that, given the low-interest-rate environment, they believe the S&P 500 will continue to climb during the year. Additionally, 19% state that the market will climb in the short term then taper off as the year progresses, while 8% are unsure whether the current trend of new highs will continue.

Here is a sampling of the responses: 

• “As long as interest rates remain low, and Federal Reserve chair Jerome Powell has indicated his desire for that, only declining earnings would likely cause a market reversal. I don’t see that in the cards.”
• “How can the outlook for stocks be for high percentage gains when the 30-year bond trades at 2%?”
• “I see generally good earnings reports but some flattening of forecasts. Together with the uncertainty of the elections and the coronavirus, I think optimism will be suppressed.”
• “It is in the current administration’s interest to keep markets up during this election cycle.”

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