Wednesday, April 30, 2008
Survey Says: Bearishness Subsiding, Uncertainty Increasing
According to a press release issued today by TradeKing, a late April survey of 3,000 equities and options traders that they conducted indicates that bearish sentiment is receding. Just 23.9 percent of active traders described themselves as either “bearish” or “very bearish”, down significantly from 48.3 percent in January. At the same time, 46 percent of surveyed investors (42.9 percent of options traders (OT), 50 percent of equities traders (ET)) indicated a “neutral/not sure” position in their market outlook for the next three months, the highest level of uncertainty reported in the past four quarters.
(The following is a blatant rip-off of the TradeKing press release.)
The survey also showed that oil prices, the U.S. dollar and interest rate changes persist as top market triggers investors are watching. However, nearly 38 percent of OT and 40.7 percent of ET listed oil as their number one “potential trade trigger” to be watched “intently”, ranking it the top concern among investors.
The in-house survey was conducted April 22-25, 2008, via email to 3,000 TradeKing clients, with an estimated 95% confidence level. The survey results were segmented into two client groups: those who trade “options only” with TradeKing and those who trade “equities only.”
“The results from our April survey seem to indicate that, although investors remain cautious, they feel the worst developments in some areas of the economy may have passed,” said Don Montanaro, CEO of TradeKing. “TradeKing investors are starting to move on from the subprime mortgage woes and focus on how oil prices might impact industry and consumer spending over the next few months. With a surprising number of clients reporting ‘better than expected’ investment returns this past quarter, they see there are still opportunities to win in a volatile market.”
On the personal finance front, active investors indicated they are responding to the current volatility in the market by adjusting investment strategies, trimming energy costs and household budgets, and considering more foreign investments.
—Twenty-nine percent of OT, 34.7 percent of ET reported adjusting to the new economic conditions by “trimming ... energy consumption”;
—Thirty percent of OT, 21.3 percent of ET are “switching investment strategies to respond to recent market volatility more effectively”;
—Twenty-one percent of OT, 21.8 percent of ET are “considering foreign investments to balance out the falling dollar”;
—Twenty-one percent of OT, 21.3 percent of ET are “trimming ... household budget spending”;(2)
—Twenty-two percent of ET respondents also favored “‘buying on the dips’ to lower my cost basis on some long-term holdings.”
In addition, the majority of respondents who will be receiving the one- time economic stimulus tax rebate said they plan to use the funds to either pay down personal debt (credit card, mortgage, student loans, etc.), or invest in the market.
(1) The Reuters/University of Michigan consumer sentiment index, April 2008.
(2) See recent New York Times article reporting on how consumers are cutting household costs, http://www.nytimes.com/2008/04/27/business/27spend.html?_r=1&scp=1&sq=recession+diet&st=nyt&oref=slogin
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