Survey says investors are getting scared

A spike in pessimism follows the S&P 500's worst week in nearly two years.

By MSN Money Partner Aug 7, 2014 5:00PM
Credit: © xPACIFICA/Corbis
Caption: A trader on the floor of the New York stock exchangeBy Jeff Cox, CNBC

As world unrest surges and the stock market wobbles, investors have gotten nervous.

At least three separate sentiment polls indicate that stock market bulls have been corralled by the confluence of factors lining up against the market: Trouble in Ukraine and Middle East violence to name two, plus a seemingly endless slew of Wall Street calls for a long-overdue correction or worse.

Respondents to the weekly American Association of Individual Investors survey indicated their strongest levels of pessimism in almost a year. Bears outflanked bulls 38.2 percent to 30.9 percent. The level of negative market views was last eclipsed for the week of Aug. 22, 2013.

"The spike in pessimism follows the Standard & Poor's 500 Index's ($INX) worst week in nearly two years and suggests some investors believe the market's upward momentum is being interrupted," Charles Rotblut, vice president at AAII, said in a narrative accompanying this week's survey. "Also playing a role in the backdrop are concerns about prevailing valuations, heightened geopolitical tensions, slow economic growth and frustration with Washington politics."

While the AAII survey takes the pulse of the retail crowd, professional investors aren't so happy either, though their level of pessimism is a good deal less.

The latest survey from Investors Intelligence registered bullishness of 50.6 percent, easily outnumbering the 17.1 percent calling themselves bears regarding near-term market action. However, the decided weighting in favor of optimism is a little deceiving.

As recently as mid-June, bullishness on the survey, which polls investor newsletter editors, stood at a lofty 62,6 percent. Bearishness was 16.2 percent just a week ago.

"The bears continue to point to the removal of Fed support, building technical divergences and now the potential impact on world trade of the increased sanctions against Russia," said John Gray at Investors Intelligence.

Most of the bull crowd moved to the correction camp, with 32.4 percent now expecting a 10 percent market drop ahead.

Of course, sentiment surveys generally are of most use as contrarian indicators -- so when sentiment gets too heated to one side, it's best to move the other way.

Bank of America Merrill Lynch strategist Savita Subramanian, in fact, indicated in a note that the Street's bearishness is indicating a "buy" signal.

BofAML recently reported heavy bearishness on Wall Street, with its survey of investment strategists showing just a 50.8 percent portfolio allocation to stocks, against the traditional 60 percent to 65 percent. That's well within the contrarian parameters the firm uses to denote a buying opportunity.

Investors Intelligence also is telling clients to buy, saying its proprietary indicator shows a market that is "deeply oversold," causing the firm to "cover shorts and take advantage of the sell-off to populate our long book."

Market direction, however, has reflected investor sentiment. The S&P 500 is down 3.3 percent over the past month and the Dow Jones Industrial Average ($INDU) has lost more than 1 percent year to date.

More from CNBC

Aug 7, 2014 7:25PM

Can you say "Fiat currency"?

Can you say "Falsified economic reports"?

Can you say "Home & auto loan subprime bubble"?

Can you say "Foreign invasion killing American low end jobs"?

Can you say "Polarized, fragile, civil order reaching a tipping point"?

Can you say "Planned destruction of the USA using Cloward–Piven strategy"?

Can you say "Nefarious powers pushing for WWIII to cover-up middle class wealth heist"?

Sure I knew you could...

Congratulations, we all lose, to late to save us now!

Aug 7, 2014 7:27PM
Good...I like fear in the majority of investors.  That means a buying opportunity can't be too far around the corner.

"Sell greed, buy fear."
Aug 7, 2014 7:28PM
Obamanation at its finest as that slippery slope gets more vertical.
Aug 7, 2014 7:24PM
Getting scared?  Where have you fools been for the last 5 years?
Aug 8, 2014 8:22AM
Don't be scared, be smart. Sell your big winners and cut stock back to 30-40 percent. Cash is good in a time like this.
Aug 8, 2014 11:43AM

Sigh...maybe I'm just getting too old but by my count the world has been on the verge of ending 7 or 8 times in my lifetime and most of those events were far worse than what's happening today. My parents thought the world was ending in the 40's; Korea was the start of WWIII, the world was definitely ending during the Cuban missile crises, and so on.

Meanwhile, had my parents put money into the market in 1944 and left it there, it would be worth 170 times its original amount.

Moral: Greedy capitalist pigs trump evil dictators every time.

Aug 8, 2014 3:54AM

"Of course, sentiment surveys generally are of most use as contrarian indicators -- so when sentiment gets too heated to one side, it's best to move the other way. Bank of America Merrill Lynch strategist Savita Subramanian, in fact, indicated in a note that the Street's bearishness is indicating a "buy" signal."

Well here's the problem, at some point, up is actual up and down is actual down. Just as stocks can go far higher then anyone thinks, the same is for the reverse. We are in massive Global Debt Crisis of epic proportions, yet almost nobody in the Mainstream Media wants to talk about it. Eventually, they won't have any other choice.

How quickly folks have forgotten Marked to Market as opposed to Marked to Fantasy. The counterpart y Derivative risk that's well over $700Trillion an growing never went away. Our national Debt will break the $20Trillion mark in less then 4 years. Interest rates will eventually soar upwards and that will break the Camel's back.

Some smart Investors might be scared, but they just might also have forgotten what they need to be scared about. Debt and Leverage caused the Great Recession. It will also cause Great Recession Part II. Those with the most money are always locking in Profits. They always have.

Aug 8, 2014 8:03AM

The time draws near.

I'm still on my see saw, Stocks drop gold rises.

I only hope the predictions of $5,000 per oz gold are true. I believe it's going a lot hire and we seem to be nearing the flash point. Just a little more misery in the world ought to do it. Maybe Obozo ought to declare himself King, yea, that ought to do it!

Kohl's just sent me a 30% coupon, This must be some sort of message from above. Just the other day, I wondered aloud about a 30% correction, and mentioned Kohl's 30% coupons. Hmmm, I think I'll shop some Gold and Silver Stocks, then hit Kohl's and run by the gun store on the way home.

Looks like Obama's mission of destroying America is almost done.

Aug 7, 2014 10:42PM
Aug 8, 2014 10:06AM

They...(whomever, they are??) have been predicting/touting Gold @ $2000 per troy, for over 5 years now, at least....It came close a couple years or so back, in the high 19's.

Holding one's breath for $5000 an oz. is going to kill a lot of people first, b-4 it happens.

Kohl's $30 coupons, I think are sent to "Occupant, AnyStreet, USA." this time of year about every year....?  You are not the "lucky chosen ones".

If you show up at the Retailer, you can even get more discounts or "Kohl's Bucks"...

We like Kohls....

BTW....Getting ammo for a lot of those guns seems to be the biggest problem...

And going out for target practice is getting to the point of REAL EXPENSIVE...even reloads..

And the day Obozo becomes KIng, you might just see $5000 Gold, or Pigs fly....??

Aug 7, 2014 8:01PM
when it comes to stock market and stocks or equities as the call them it seem like the same rules as when the south sea bubbles or the roaring 20's rules still applies only this time the money taken out are much bigger than during those former periods. the new ceo's and other insiders are far more numerous dipping aggressively into the money pool now.
Aug 8, 2014 7:57AM
"Well here's the problem, at some point, up is actual up and down is actual down. Just as stocks can go far higher then anyone thinks, the same is for the reverse."
Of the $632 TRILLION in global debt ascertained by valid commissions as of August, 2012, nearly ALL of it was the fluff lifting markets through artificial manipulation. Many feel that the markets are worse now and that as much as an additional $500 TRILLION in derivatives and other phony debt instruments have been generated since August, 2012. That's more than $1 QUADRILLION in debt against economies with majorities living in poverty. It's a FACT that this ends two ways- either the phony evaporates and core economies reset to reconciled validity, or the few million in wealth are slaughtered and the reset happens anyway. 
Aug 8, 2014 12:28AM
Didn't there used to be a fear index???  No, no, not the VIX. Can't stand that index. Big moves up lowers the vix, big moves down increases, so define what volatile (good or bad) is???
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