Two out of Five Investors Suspicious of Current Market Optimism

This week’s Sentiment Survey special question asked AAII members to share their thoughts about the level of optimism being reflected in the stock market. More than two out of five respondents (41%) think there is currently too much optimism. Respondents in this group think the rise in stock prices does not reflect current conditions and/or ignores the possibility of the pandemic worsening again. An additional 22% of respondents think stock prices are too high given the ongoing weak economic conditions.

Nearly 14% view the rally as being justified. They credit fiscal and monetary stimulus, the reopening of businesses and progress on finding a vaccine. About 8% think the upward run in stock prices is attributable to the Federal Reserve’s actions.

Here is a sampling of the responses:

• “I think the financial markets are getting ahead of the reality of the recovery right now.”
• “I think the optimism is too high and stock prices have gotten too far ahead of fundamental valuations.”
• “The stock market will continue to rise due to all the money printing by the Fed.”
• “It is justified due to the sharp restart of the economy after the coronavirus and the huge monetary and budget stimulus.”
• “I’m perplexed. I have no idea during these times how to guess the direction of the market.”

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