The PNC-CivicScience Investor Sentiment Index (ISI) strengthened for the second month in a row in November 2017, reflective of greater optimism than was measured through the summer months. As measured by the poll, investor confidence had softened since early in the year through the month of September. However, in the last two months, there has been a sharp reversal higher and sentiment has reverted to near the levels where we began the year.
Sentiment, which had been on a downward trend after starting the year strong, staged a rebound beginning in October. The ISI rose to 51.7 in November, up from 51.3 in October. The November sentiment read is just slightly below the high readings for the year, noted in January and March, both at 51.8. The stronger readings through the fall are in line with broader market views and optimism in the economy, ongoing legislation on tax reform, and strong financial markets.
Volatility thus far in 2017 remains sanguine overall, with a few jumps from time to time as markets tend to react quickly to headlines. Volatility in the S&P 500® has eased further throughout the year, as major U.S. equity indexes continued to set new record closing highs through the fall months. The severe hurricane storm season was a worry for many Americans, however the economy has seemed to have quickly bounced back from some of the negative impacts. Third-quarter GDP was revised higher to 3.3%, housing indicators show rebuilding efforts have begun, and the last employment report (October) reflected a recovery as well. The Federal Reserve (Fed) looks to be on track to raise interest rates one more time in 2017, at the December meeting. A new Fed Chairman was nominated and with Senate approval will take office in February 2018. As we head through the final month of the year, market optimism is likely to continue to rise with each passing day following Congress’s progress on passing a new tax plan.
Individual Poll Questions
Question 1: Six months from now, do you think business conditions overall will be more favorable or less favorable to large, publicly traded companies?
Sentiment surrounding Business Conditions was little changed from last month, with the poll at 55.5 for November versus 55.6 for October. Early in the year , poll participants were more optimistic that business conditions would improve in the next six-month period for large, publicly traded companies. Business conditions sentiment has waned some as we have headed through the year, but took a sharp turn higher in October. Data published from the Institute for Supply Management ®, as we noted last month, appears to tell a similar story, as the published Manufacturing Purchasing Manager Index (PMI ®) weakened slightly for November to 58.2 from the prior 58.7, both still strong readings. Typically a reading over 50 indicates expansionary conditions.
Question 2: When it comes to U.S. stock markets, would you say that you feel bullish (optimistic) or bearish (pessimistic) right now?
The PNC – CivicScience Investor Sentiment Index Bullish/Bearish sentiment currently suggests that more survey participants are bullish than bearish about U.S. stock markets, more so in November than in any previous month in 2017. Participants have become more bullish as we’ve moved through 2017.
Bullish/Bearish sentiment has moved toward the former this year, with a reading of 56.6, higher than the 55.5 reading in October and marking a new high for the year. This implies that more than half of survey respondents held a more bullish than bearish view. In November 2016 , when the poll was first launched, sentiment tilted to ward bearish at 49.2.
As noted earlier, financial markets have generally shared this view, as stock indexes domestically and also internationally have risen higher this year. In addition, consumer confidence as measured by the Conference Board rose again in November, owing to a strong labor market, optimism over tax cuts , and continued economic expansion in the United States.
Question 3: Six months from now, do you expect to invest in stocks/equities at a higher or lower rate than you are currently investing?
Sentiment towards Personal Investment questions market participants as to whether they will be more or less likely to invest in stocks six months from now versus current levels. Individuals are likely to respond to headlines from a more personal view than the business community. Personal Investment Sentiment has improved slightly in October and November, to a reading of 43.1 in November, from 42.8 in October.
The PNC – CivicScience Investor Sentiment Index (ISI) survey results for November depict investors as generally more optimistic than last month. Investor Bullish versus Bearish sentiment rose, and from a personal investment perspective were slightly more optimistic in terms of investing in stocks six months from now. In regard to business conditions, there was a modest downward movement in the survey reading, but not significantly so.
The next PNC – CivicScience Investor Sentiment Index will be published in January.