Individual Investors Get More Bearish as Stocks Limp

How does the individual investor view the prospects of an improving stock market up ahead? About as positively as American soccer fans regard the US’s chances of winning the World Cup next time.

Individual investor pessimism, a key gauge of the US stock market’s mood, soared this past week, capping a string of weak trading days.

This comes amid a market slide that began when the S&P 500 peaked on Jan. 26, amid concerns about rising interest rates and international trade turmoil. The index has taken a further tumble since June 12, only nudging up Thursday by 0.87%.

The bearish barometer, part of the AAII Sentiment Survey, marked the largest one-week jump in negative outlook since January 2016, Bespoke Investment Research said.

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Bearish sentiment climbed to 40.8% from 26.2% the week before, showing that respondents believe stocks will fall over the next six months. This increases ends a 10-week streak of negative readings below the historical average of 30.5%, according to the American Association of Individual Investors.

At the same time, bullish sentiment took a header, plunging 10.3 percentage points to 28.4%.

Despite a still-surging economy and low unemployment, the increase in the bearish indicator may show that regular investors are growing wary of the market’s chances to overcome headwinds.

Even the tech realm and small stocks, which had been doing relatively well this year, have dipped lately. Both the tech-heavy Nasdaq Composite and the small-cap Russell 2000 have dropped over the past couple of weeks (although both blipped up Thursday).

Tags: American Association of Individual Investors, Bearish, Stock Market

A $2 billion drop in funded status during May didn’t stop the 100 largest US corporate pension plans from keeping the aggregate ratios above 90%, Milliman reports.

“Sometimes no news is good news for corporate pensions,” said Zorast Wadia, co-author of the Milliman 100 Pension Funding Index, the firm’s chart of the 100 largest US companies.

Last month, companies in the index gained 0.73%, which Wadia said “exceeded monthly expectations.” The monthly discount rate decreased four points, which was offset by the returns.

The pension deficit for the plans in the Milliman index has shrunk by $116 billion in the past year.

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Rising interest rates caused for mixed forecasts from Milliman, as economists have predicted a downturn in 2019.

On the positive side, the funded ratio could hit 100% at the end of the year, potentially reaching 116% funded by the end of 2019. This would be possible should interest rates reach 4.24% by December and 5.03% at the end of 2019, coupled with 10% returns or higher.

On the negative end, funded status for the top 100 plans would drop to 87% at the end of 2018, and 81% at the end of 2019. For that to happen, rates would have to reach 3.64% later this year, and 3.03% in December 2019, with returns of 2.8%.