The Markets

“Gonna take a sentimental journey…Gonna set my heart at ease…Gonna make a sentimental journey…To renew old memories.” If you’re a fan of Ella Fitzgerald or Frank Sinatra, then you probably recognise these lyrics. Although we rarely think of them as such, the ups and downs of stock and bond markets are sentimental journeys. They reflect the thoughts and attitudes of investors toward particular companies, investments, and markets. Investopedia explains it like this:

“Market sentiment is the feeling or tone of a market, or its crowd psychology, as revealed through the activity and price movement of the securities traded in that market. For example, rising prices would indicate a bullish market sentiment, while falling prices would indicate a bearish market sentiment. Market sentiment is also called “investor sentiment” and is not always based on fundamentals.”

The American Association of Individual Investors (AAII) measures investor sentiment by polling their membership each week. The long-term average is 39 percent bullish, 30.5 percent neutral, and 30.5 percent bearish. Last week, 28.3 percent of its members were bullish, 28.7 percent were bearish, and 43 percent were neutral.

According to Yahoo! Finance, that’s the highest level of investor neutrality in more than a decade. According to Lloyds Private Banking Investor sentiment survey, net sentiment among investors towards Eurozone shares was the highest climber, up 9 points on last month. However, this is still the lowest asset class in the index at -14%.

Investor sentiment towards UK equities increased to 42% this month, up 2 points from February, with 51% of respondents holding a positive view and 9% holding a negative one.

Sentiment towards Emerging Market shares saw a rise of 4 points to 18% this month, turning around a 5 point drop in February, which was possibly a reflection of worries about Argentina and China. Japanese equities, which saw their sharpest drop in net sentiment in the survey’s history last month, fell slightly more (by 5 points) to -2%.