The PNC-CivicScience Investor Sentiment Index (ISI) reflects a jump in the level of investor confidence in October versus the previous poll in September. In general, investor confidence since the beginning of 2017 has bounced around but reflects a downward trend. The ISI high was reached in December 2016, followed by a somewhat choppy read in the first months of 2017, before becoming a bit more stable as the year has progressed. Sentiment seemed to wane during the summer months, reaching the lowest reading year to date in September before staging a sharp reversal higher in October. The ISI climbed to 51.3 in October, up from 49.5 in September. The current sentiment read is at the second-highest level thus far for 2017, with only March registering stronger confidence. In a broader context, this sentiment seems to align with financial markets trading higher in September reflective of a more positive tone. While overall volatility remains low, relatively speaking, in 2017, there were some rumbles in response to headlines as interpreted by market participants. Volatility in the S&P 500® eased during late summer and early fall. However, the S&P 500 traded higher, reaching new record closing highs. The Federal Reserve looks to be on track to raise interest rates one more time in 2017, perhaps at its December meeting. Geopolitics are a continued concern for markets as tensions over North Korea’s nuclear missile testing reports linger. Evidence of the economic impact of the severe hurricane season began to make its way into the data, and surprised markets by a general resiliency. Markets remain optimistic that a new tax plan may be implemented, and markets traded higher on the announcement of a draft plan. Domestic stocks have moved higher in 2017. The S&P 500 rose approximately 2.2% in the month of October, and year to date through October 31, 2017 the S&P 500 has climbed 15.0%. Including the reinvestment of dividends, the S&P 500 has returned 16.9% year-to-date.
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 off to a strong start at the onset of 2017, as poll participants felt conditions would improve for the next six-month period for large, publicly traded companies. Sentiment for Business Conditions has waned some as we have headed through the year, but took a sharp turn higher in October. The Institute for Supply Management® (ISM®) Manufacturing Report on Business® tells a similar story, as it hovered around the 60 level in September and October. Typically a reading over 50 level 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 Bullish/Bearish Sentiment question currently suggests that more poll participants are bullish than bearish about U.S. stock markets, yet not significantly so. Participants have also generally become more bullish as we’ve moved through the months of 2017.
Sentiment this year has gradually risen and strengthened further in October, with the Bullish/Bearish sentiment at 55.5 in October, which is the high so far for 2017. This implies to us that more than half of poll respondents held a more bullish than bearish view. This optimism is generally in line with the positive momentum that drove stock indexes higher, particularly in September and October. In addition, consumer confidence as measured by the Conference Board rose to the highest level in 16 years, indicating consumers have a positive view of current economic conditions.
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?
The Personal Investment Sentiment question asks market participants whether they will be more or less likely to invest in stocks six months from now versus currently. Individuals are likely to respond to headlines from a more personal view than the business community.
Personal Investment Sentiment has in general edged lower through 2017, to a level of 42.3 for September, before stabilizing and modestly rising to 42.8 for October, suggesting that six months from now they will invest in stocks at a lower rate than they are at this time.
Poll results for October indicate that investors generally remain more bullish than bearish regarding U.S. equity markets. Across the board sentiment was stronger than in September; investors are more bullish, feel better about business conditions, and are slightly more optimistic in terms of investing in stocks six months from now.
The next PNC-CivicScience Investor Sentiment Index will be published in December.