According to the PNC-CivicScience Investor Sentiment Index (ISI), investor confidence appears to have eased in the summer months of June through July, before taking a sharper dip lower in September. Over the past year, investors appear to have grown less confident overall than at the start of the year. The ISI high was reached in December 2016, followed by a somewhat choppy read in the first quarter of 2017, with investor sentiment reflecting an unsure forecast, likely in response to a year which began with a new administration taking office.
Sentiment waned slightly through the summer months, retreating to 49.5 in September, down from 50.6 in August. The current sentiment read is at the lowest level thus far for 2017. In a broader context, this sentiment seems to align with volatility as viewed by the financial markets.
The S&P 500® reflected spurts of volatility late in the summer, while overall volatility remains low relatively speaking in 2017, likely responding to headlines as interpreted by market participants. Economic data and other factors influenced market trading as investors looked to forecast if and when the Federal Reserve would next
raise interest rates. Geopolitics also concerned markets as tensions with North Korea rose due to reported nuclear missile testing. Volatility declined some in September, likely on easing concerns regarding North Korea. Markets digested the potential ramifications of the severe hurricane season. Additionally, markets began pricing in the possibility that a new tax plan would be announced.
Despite said headlines, domestic stocks have moved higher in 2017. The S&P 500 rose approximately 4.0% in the third quarter, and year to date through September 30, 2017, the S&P 500 has climbed 12.5%. Including the reinvestment of dividends, the S&P 500 has returned 14.2% 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 moved through the year. Post-election, newly elected President Donald Trump’s proposed tax reforms and fiscal spending plans were likely viewed as favorable towards businesses. In addition, the U.S. economy has generally continued to reflect continued growth, while estimates for third-quarter GDP could reflect some temporary impact from the hurricane season.
Question 2: When it comes to U.S. stock markets, would you say that you feel bullish (optimistic) or bearish (pessimistic) right not?
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 throughout 2017.
Sentiment this summer held relatively stable, with the Bullish/Bearish sentiment rising to 54.9 in July, which is the high so far for 2017, implying that more than half of poll respondents held a more bullish than bearish view. In ensuing months, the Bullish/Bearish sentiment held relatively stable, with readings of 54.8 in August and with a modest decline to 54.4 in September. As we noted above, while headlines rose, ultimately tensions eased through the summer and volatility declined as well.
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 weakened slightly through 2017, to a level of 42.3 for September, below the year’s highest reading of 44.9 recorded in June, suggesting individuals believe that six months from now they will invest in stocks at a lower rate than they are currently.
In general, according to the poll, investors remain more bullish than bearish regarding U.S. equity markets. While still positive on business conditions, the outlook is less positive than it was at the start of 2017. Finally, individuals believe in six months they will invest slightly less in U.S. stocks than they are currently investing.
The next PNC-CivicScience ISI will be published in November.