As investors brace for more volatility, their uncertainty about the direction of the stock market is at the highest level in six years.
The latest poll by American Association of Individual Investors shows that 38 percent of respondents expect stock prices to remain flat in the next six months. That’s the highest level since April 2005.
European sovereign debt problems, domestic politics and lackluster economic growth are all weighing on the sentiment, according to the survey.
“The sentiment numbers reflect the sense that a short-term solution to the problems here and in Europe do not exist,” says Charles Rotblut, vice president at AAII. “There is also a sense of frustration about the inability to get good returns right now”.
Though this week’s neutral sentiment reading is unusually high by recent standards, it remains within its long-term historical range. On the other hand, both bullish and bearish sentiments among investors are down.
Only 33.7 percent of respondents expect stock prices to rise over the next six months. It is the fifth time in the past six weeks that bullish sentiment has been below its historical average of 39 percent.
Bearish sentiment, expectations that stock prices will fall over the next six months, is down to 28.2 percent. This is the first time in six weeks that bearish sentiment has been below its historical average of 30 percent.
On a bright side, there is no significant level of fear among investors, and many are looking for modest gains in 2012, says Rotblut.
While volatility is widely expected to continue, respondents predicting an up year for S&P 500 outnumbered those expecting a down year by a margin of three to one.
Expectations were modest, however, with more of than half of those predicting gains saying the S&P 500 will rise by 10 percent or less.
According to the survey, a notable number of AAII members are anticipating another pullback in stock prices in 2012.
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