Investor sentiment has turned decidedly more bearish, according to the latest survey of independent investors by Sandy-based Ally Bank. The Ally Invest quarterly said that bullish and very bullish sentiment dropped from 76 percent in the previous quarter to 30 percent in the first quarter of 2018, suggesting that investors are anticipating a slowdown of the recent bull market.
Similarly, investor enthusiasm for the FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks appears to be fracturing, as the majority of investors surveyed expect Facebook earnings to disappoint, while believing Amazon’s will exceed expectations.
The results of the survey, conducted March 28-April 3 are based on responses from 300 independent investors.
According to the survey, bullish sentiment dropped to its lowest point in past three quarters. The quarterly survey showed 27 percent of investors have a bullish market outlook (versus 61 percent in the fourth quarter of 2017 (Q4) and 49 percent the quarter before that) and 3 percent are very bullish (compared with 15 percent Q4 and 6 percent the quarter before that). Conversely, bearish sentiment jumped to 24 percent from 3 percent in Q4.
Top Concerns
Investors continue to closely watch corporate earnings (74 percent of respondents) and tax reform (55 percent) as key market drivers. However, a new set of issues are causing concern for investors. In Q4, the majority of investors surveyed were most concerned with international unrest, slowing year-over-year growth and a weakening of the U.S. dollar. In this most recent survey, respondents report the most concern over the current U.S. political environment (59 percent), a sense that the market may be overvalued (55 percent) and higher interest rates (49 percent).
In response to the question “What is your outlook for each of the ‘FAANG’ stocks for the fourth quarter?,” investor sentiment deviated from the past two quarters, showing significantly weakened confidence in Facebook and Apple, while strong bullish sentiment remains steadfast for Amazon and is on the rise for Netflix and Google. Here is how response for the FAANG stocks compared with Q4:
• Facebook (meet street expectations: 22 percent, down from 31 percent; exceed street expectations: 12 percent, down from 29 percent).
• Amazon (meet street expectations: 25 percent, up from 19 percent; exceed street expectations: 47 percent ,up from 41 percent).
• Apple (meet street expectations: 37 percent, up from 35 percent; exceed street expectations: 24 percent, down from 27 percent).
• Netflix (meet street expectations: 33 percent, remaining even from Q4; exceed street expectations: 32 percent, up from 27 percent).
• Google (meet street expectations: 34 percent, up from 28 percent; exceed street expectations: 31 percent, down from 38 percent).
On the heels of the new 2017 tax law, the Ally Invest survey asked investors whether they had realized any effects of the recent tax changes. Perhaps contributing to the rise in negative sentiment, more than half of respondents said they have not experienced any impact from the law thus far in 2018:
• “I have not seen any impact from the tax reform,” 51 percent.
• “Yes, my market position has been positively impacted,” 23 percent.
• “Yes, my market position has been negatively impacted,” 9 percent.
• “I don’t know,” 16 percent.