Charles Rotblut leads a class in AAII’s new Essential Investing Video Course. Go to https://www.aaii.com/ves for more information and to subscribe.

Read more

Optimism among individual investors about the short-term outlook for stocks decreased in the latest AAII Sentiment Survey. Meanwhile, neutral sentiment and pessimism increased.

Bullish sentiment, expectations that stock prices will rise over the next six months, decreased 13.6 percentage points to 31.4%. Bullish sentiment is below its historical average of 37.5% for the sixth time in seven weeks.

Subscribe now

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased 7.4 percentage points to 26.4%. Neutral sentiment is below its historical average of 31.5% for the 102nd time in 104 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, increased 6.1 percentage points to 42.3%. Pessimism is unusually high and is above its historical average of 31.0% for the 21st consecutive week.

The bull-bear spread (bullish minus bearish sentiment) decreased 19.7 percentage points to 10.9%. The bull-bear spread is below its historical average of 6.5% for the 19th time in 21 weeks.

Subscribe now

This week’s special question asked AAII members if their portfolios are “all American,” or if they also diversify internationally [via stocks, exchange-traded funds (ETFs) and/or mutual funds]?

Here is how they responded:

• Most of my portfolio is domestic, with just a small allocation to foreign companies: 54.5%

• I hold a mix of domestic and foreign investments: 29.8%

• I solely invest in domestic companies: 12.4%

• Prefer not to answer: 1.7%

This week’s Sentiment Survey results:

Bullish: 31.4%, down 13.6 points
Neutral: 26.4%, up 7.4 points
Bearish: 42.3%, up 6.1 points

Historical averages:

Bullish: 37.5%
Neutral: 31.5%
Bearish: 31.0%

Subscribe now

Year to date, the S&P 500 has set 24 new all-time highs. This puts 2026 among the top 20 years since World War II for record highs set during the first half of the year, according to CFRA Research chief investment strategist Sam Stovall.

What is notable about the market’s run is that there is earnings growth behind it. Only three of the 11 S&P 500 sectors failed to report double-digit growth in first-quarter 2026, according to LSEG I/B/E/S. Large-cap consumer staples companies gained 8.1%. The energy and healthcare sectors reported declines of 0.8% and 3.4%, respectively.

Subscribe now

The earnings growth is being fueled by widening profit margins, as illustrated by the chart below from J.P. Morgan Asset Management’s Guide to the Markets. The gray shading in each column is the contribution of profit margins to growth.

Source: J.P. Morgan Asset Management.

Valuations for the median stock have been rising, though at a slower pace than the price gains. The trailing 12-month price-earnings (P/E) ratio for the median S&P 500 stock is 25.8. The index’s five-year average price-earnings ratio is 23.9.

This isn’t to say that S&P 500 valuations are cheap, but it does show that we are not seeing a big multiple expansion. (Multiple expansion occurs when valuation ratios rise faster than the fundamental metric on which they are based.) This is a positive for the stock market. More attractive valuations continue to be found among mid-cap (median price-earnings ratio of 22.6) and small-cap (21.8) stocks.

Among the AAII Stock Screens, those incorporating growth or momentum measures fared best during the first half of the year. The Driehaus Revised screen soared 60.1% year to date. The original Driehaus screen ranks in second place with a 46.3% year-to-date return. Though both require recent accelerations in earnings growth, the revised screen also has relative strength criteria.

The outperformance of growth- and momentum-related screens is not surprising. The S&P 500 Momentum index and the S&P 500 Growth index were two of the best S&P 500 subindexes during the first half of 2026. They rose 44.1% and 21.9%, respectively.

Looking to the Second Half of 2026

Based on historical data, the 24 all-time highs set during the first half of the year are a lucky sign. In the other years ranking in the top 20 years for first-half record highs, the S&P 500 gained an additional 6% on average and rose in price 80% of the time in the second half of the year, according to Stovall.

Earnings growth lends support to these odds. Analyst forecasts compiled by LSEG I/B/E/S call for earnings to rise in the third and fourth quarters of 2026 for both S&P 500 and Russell 2000 index companies.

Valuations are not cheap, but they’re not excessive either. The median forward price-earnings ratio for S&P 500 companies is 19.0. Small-cap stocks are cheaper with a median forward price-earnings ratio of 16.0.

The geopolitical and macroeconomic pictures are wild cards. Though oil prices have come down, traffic in the Strait of Hormuz remains well below pre-war levels. Traders continue to price in the possibility of the Federal Reserve raising interest rates twice before the end of the year.

Downside volatility during the third quarter of a calendar year is not unusual. Pullbacks (declines of 5% to 10%) are a normal part of stock market behavior. Predicting their timing requires a working crystal ball.

Long-term, disciplined investors learn not to get giddy about bull market runs or anxious about market drops. Still, it is always more enjoyable when Mr. Market is in a good mood

Subscribe now

Holiday Schedule

The U.S. financial markets and the AAII office will be closed on Friday, July 3, in observance of Independence Day. We at AAII wish you and your family a safe and enjoyable Fourth of July weekend.

More on AAII.com

• Navigating Market Cycles With Shiller’s CAPE Ratio
  The CAPE ratio empowers long-term investors to navigate volatile markets, forecast returns and make smarter decisions grounded in historical valuation trends.

• Driehaus Revised Screen
  The “father of momentum investing,” Richard Driehaus, devised an approach that seeks out companies with accelerating earnings growth, rising earnings estimates and meaningful positive earnings surprises.

• Outperformance and 10 Changes for the Model Shadow Stock Portfolio
  The newly released July 2026 AAII Journal includes a quarterly review of the model portfolio, which resulted in five deletions and five additions.

  
  AAII Sentiment Survey

Optimism among individual investors about the short-term outlook for stocks decreased in the latest AAII Sentiment Survey. Meanwhile, neutral sentiment and pessimism increased.

Bullish sentiment, expectations that stock prices will rise over the next six months, decreased 13.6 percentage points to 31.4%. Bullish sentiment is below its historical average of 37.5% for the sixth time in seven weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased 7.4 percentage points to 26.4%. Neutral sentiment is below its historical average of 31.5% for the 102nd time in 104 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, increased 6.1 percentage points to 42.3%. Pessimism is unusually high and is above its historical average of 31.0% for the 21st consecutive week.

The bull-bear spread (bullish minus bearish sentiment) decreased 19.7 percentage points to 10.9%. The bull-bear spread is below its historical average of 6.5% for the 19th time in 21 weeks.

This week’s special question asked AAII members if their portfolios are “all American,” or if they also diversify internationally [via stocks, exchange-traded funds (ETFs) and/or mutual funds]?

Here is how they responded:

• Most of my portfolio is domestic, with just a small allocation to foreign companies: 54.5%

• I hold a mix of domestic and foreign investments: 29.8%

• I solely invest in domestic companies: 12.4%

• Prefer not to answer: 1.7%

This week’s Sentiment Survey results:

Bullish: 31.4%, down 13.6 points
Neutral: 26.4%, up 7.4 points
Bearish: 42.3%, up 6.1 points

Historical averages:

Bullish: 37.5%
Neutral: 31.5%
Bearish: 31.0%

Subscribe now

This week, we cover a strategy that identifies companies with strong return on equity (ROE) and give you a list of stocks that currently pass the AAII Return on Equity screen. Return on equity may help to reveal profitable firms, but does Wall Street reward the stock prices of these firms? As of June 30, 2026, the AAII Return on Equity screen has an average annual gain of 13.2% since inception in 1998, compared to the S&P 500 index’s 7.5% return over the same period.

Subscribe now

Measuring Profitability by What Shareholders Earned

Return on equity is a popular measure of profitability and corporate management excellence. The measure is determined by dividing the firm’s annual earnings by shareholder’s equity. This relates earnings generated by a company to the investment that shareholders have made and retained within the firm. Shareholder’s equity is equal to total assets of the firm less all its debt and liabilities. Also known as stockholder’s equity, owner’s equity or simply equity, it represents investors’ ownership interest in the company. It is also known as the book value of the company.

Warren Buffett considers it a positive sign when a company is able to earn an above-average return on equity. Buffett believes that a successful stock investment is first and foremost the result of the underlying business; its value to the owner comes primarily from its ability to generate earnings at an increasing rate each year. Buffett examines management’s use of owner’s equity, looking for management that has proven its ability to employ equity in new moneymaking ventures, or for stock buybacks when they offer a greater return. If the earnings are properly reinvested in the company, earnings should rise over time and stock price valuation will also rise to reflect the increasing value of the business.

Return on equity indicates how much the shareholders earned for their investment in the company. Annual net income of $100 million created on a base of $300 million in shareholder’s equity is very good ($100 ÷ $300 = 0.33, or 33%). However, $100 million in annual net income relative to $3 billion in shareholder’s equity would be considered relatively poor ($100 ÷ $3,000 = 0.03, or 3%). Generally, the higher the return on equity, the better. A return on equity above 15% is good, and figures above 20% are considered exceptional. However, it is important to compare return on equity with industry averages to get a true feel for the significance of a company’s ratio.

Return on Equity Defined

Return on equity can be simply defined as net income divided by common shareholder’s equity. However, return on equity can be broken down into three components: net profit margin, asset turnover and financial leverage. Multiplying these three components together results in return on equity.

The net profit margin—net income divided by sales—reflects how efficient a firm is in operations, administration, financing and tax management per sales dollar. A rising or improving profit margin over time translates into an increase in earnings for a given level of sales.

Asset turnover—sales divided by total assets—shows how well a company utilizes its asset base to produce sales. Poorly deployed or redundant assets result in low asset turnover that adversely reflects return on equity and profitability.

Multiplying profit margin and asset turnover together results in return on assets (ROA). A firm can increase its return on assets, and thereby its return on equity, by increasing its profit margin or its operating efficiency as measured by its asset turnover. Margins are improved by lowering expenses relative to sales. Asset turnover can be improved by selling more goods with a given level of assets. This is why companies try to divest assets (operations) that do not generate a high degree of sales relative to their value, or assets with decreased sales generation. When examining profit margins or asset turnover, it is important to consider industry trends and compare them to how a company is doing within its industry.

Financial leverage completes the return on equity equation. Financial leverage—total assets divided by common shareholder’s equity—indicates the degree to which the firm has been financed through debt as opposed to equity sources. The greater the value of this leverage ratio, the greater the financial risk of the firm—but also the greater the return on equity. When equity is small relative to debt, generated earnings will result in a high return on equity, if the firm is profitable. The risk with high levels of debt is that a company will not generate enough cash flow to cover the interest payments during challenging times.

Debt magnifies the impact of earnings on returns during both good and bad years. When large differences between return on assets and return on equity exist, an investor should closely examine the liquidity and financial risk ratios.

The ideal firm would maintain a high net profit margin, utilize assets efficiently and do it all with low risk, as reflected by low financial leverage. The key in working with return on equity is examining and understanding the interplay between the determinants of the ratio.

Members are looking for your input. Can you help with this question from the Stock Screening & Analysis Community?

High return on equity (ROE) can just mean high debt in disguise. With that in mind, do you actually check leverage before trusting the number, or does return on equity alone sell you on a stock?

Click here and then choose the Join Community button on the right to answer this question or read their responses.

Subscribe now

Implementing the AAII Return on Equity Screen

The primary goal of the AAII Return on Equity screen is to identify companies with consistently high return on equity. Secondarily, the approach includes characteristics to filter out firms with high levels of debt, low margins and low asset turnover relative to industry medians.

The AAII Return on Equity approach starts by seeking out companies operating with a return on equity 1.5x their respective industry median over the last 12 months and for each of the last five fiscal years. These screens help to reveal companies whose management has consistently generated the highest profits from the firm’s equity capital. The AAII Return on Equity strategy does not simply screen for companies with return on equity levels of 20% or higher but instead looks for ratios that are high relative to industry norms to highlight firms outperforming their peers.

As discussed above, return on equity is influenced by profitability, efficiency and leverage. Therefore, the next set of screens seeks companies outperforming their peers in these areas. First, the AAII Return on Equity approach requires that a firm’s net margin (net income divided by sales) exceeds the industry median over the last four quarters (trailing 12 months). Net profit margin looks at bottom-line profitability. Firms exceeding their peers are translating a higher percentage of sales into profits.

Next, the AAII Return on Equity screen makes sure that the asset turnover (sales divided by total assets) for a firm exceeds the industry median over the last four quarters. Asset turnover helps to measure the efficiency of a firm’s use of its asset base. Firms exceeding their peers are generating higher levels of sales dollars for a given level of assets.

The AAII Return on Equity approach also specifies that when looking at the financial leverage of firms, the ratio of total liabilities to total assets at the end of the most recent quarter is below the industry median. A high return on equity can be attained by having a very high amount of debt and, therefore, a very low shareholder’s equity. In such a case, return on equity would be high, but risky. Financial leverage increases return but also increases risk. Highly leveraged firms have more volatile earnings. Acceptable levels of debt vary from industry to industry. More stable industries such as utilities can comfortably carry more debt on their balance sheets than volatile industries such as oil and gas. By comparing levels of liabilities to industry medians, the AAII Return on Equity screen takes industry differences into account.

To help ensure some basic level of growth, the AAII Return on Equity strategy requires positive earnings and sales growth over the past 12 months. The approach also requires that the firm’s five-year historical growth rates in earnings and sales exceed their respective industry median. The approach does not specifically look for high absolute levels of growth, just signs that the firms are expanding faster than their peers.

The AAII Return on Equity screen also requires that a stock be listed on an exchange to help ensure trading liquidity. Therefore, stocks that trade over the counter (OTC) are excluded. Due to their special nature, the AAII Return on Equity screen also excludes real estate investment trusts (REITs), closed-end funds (CEFs) and American depositary receipts (ADRs).

Stocks Passing the Return on Equity Screen (Ranked by 12-Month Return on Equity)

____

Keep in mind that no matter how well a stock screening methodology has performed (or how badly it has underperformed) over the long term, stock screening is only the first step in the stock selection process. You will want to do your homework to see why these companies are at their current levels. Only then will you gain insight into those that will continue to languish and those that may eventually flourish.

The stocks meeting the criteria of the approach do not represent a “recommended” or “buy” list. It is important to perform due diligence to verify the financial strength of the passing companies and to identify those stocks that match your investing tolerances and constraints before committing your investment dollars. Keep in mind that the quantitative screens AAII has developed are based upon our interpretations of published works tied to the market gurus.

Subscribe now

A member posted a question in the AAII Allocation Strategies Community recently about boosting “safe money” returns and was met with many different answers. This led me to wonder:

For generations, safety in investing meant stability of principal. Certificates of deposit (CDs), Treasury bills and investment-grade bonds were the go-to safe havens. But decades of low interest rates and persistent inflation have rewritten the rules.

Read more

Charles Rotblut leads a class in AAII’s new Essential Investing Video Course. Go to https://www.aaii.com/ves for more information and to subscribe.

Featured Tickers: CMSQY, JKHY, JPM, V

Digital assets are evolving from speculative assets like Dogecoin and nonfungible tokens (NFTs) and into mainstream finance. This evolution includes stablecoins and tokenization. Computershare Ltd. (CMSQY), Jack Henry & Associates Inc. (JKHY), JPMorgan Chase & Co. (JPM) and Visa Inc. (V) are among the companies involved with this evolution.

Read more

Optimism among individual investors about the short-term outlook for stocks increased in the latest AAII Sentiment Survey. Meanwhile, neutral sentiment and pessimism decreased.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 8.4 percentage points to 44.9%. Bullish sentiment is above its historical average of 37.5% for the first time in six weeks.

Subscribe now

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, decreased 5.1 percentage points to 18.9%. Neutral sentiment is unusually low and is below its historical average of 31.5% for the 101st time in 103 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, decreased 3.2 percentage points to 36.1%. Bearish sentiment is above its historical average of 31.0% for the 20th consecutive week.

The bull-bear spread (bullish minus bearish sentiment) increased 11.6 percentage points to 8.8%. The bull-bear spread is above its historical average of 6.5% for the second time in 20 weeks.

Subscribe now

This week’s special question asked AAII members how the memorandum of understanding between the U.S. and Iran has influenced their economic expectations.

Here is how they responded:

• Makes me more pessimistic: 31.2%

• No impact/little impact: 34.4%

• Makes me more optimistic: 27.4%

• Not sure/no opinion: 7.0%

This week’s Sentiment Survey results:

Bullish: 44.9%, up 8.4 points
Neutral: 18.9%, down 5.1 points
Bearish: 36.1%, down 3.2 points

Historical averages:

Bullish: 37.5%
Neutral: 31.5%
Bearish: 31.0%

See more Sentiment Survey results.

Subscribe now

Many of you reading this likely will not trade perpetuals, but someone you know might. It is worth being familiar with them so you can explain the risks.

Currently, perpetuals only track the price of cryptocurrency in the U.S. Proponents of perpetuals are pushing to make them available for energy commodities as well. The U.S. Commodities and Futures Trading Commission (CFTC) is seeking public comments on this, as well as on the 24/7 trading of energy futures contracts. Instructions on how to comment are available in the June 25, 2026, issue of the Federal Register.

Subscribe now

Traditional futures contracts track the prices of certain cryptocurrencies, plus commodities, traditional currencies and financial instruments. Futures contracts, importantly, have preset expiration dates. Futures contracts expire on either a daily, monthly or quarterly basis. At expiration, the contract is settled with the delivery of cash or the underlying asset (e.g., oil).

Many traders exit their futures contracts before expiration to avoid settlement. A gain or loss is realized at the time the contract is exited, depending on the purchase price and the price movement of the underlying asset or financial instrument.

Various businesses use futures contracts to hedge against a change in prices. A farmer, for instance, may use futures contracts to lock in a set price for their crops. Transportation companies may use futures contracts to protect against rising fuel prices. Businesses with overseas operations may use currency futures contracts to hedge against exchange rate moves.

While perpetuals can be used for hedging a position in cryptocurrency that you own or would buy at a certain price, they are pitched to those who wish to speculate. Kalshi and Coinbase describe them as a way to trade cryptocurrencies without owning the underlying asset.

There is no delivery since perpetuals never expire. A trader realizes a gain if the contract rises in value after purchase, and they realize a loss if the contract falls in value.

Money can also be gained or lost on perpetuals through funding costs. Funding costs are mechanisms used to keep the price of the perpetual in line with the price of the underlying asset.

How Kalshi’s Funding Rate for Perpetuals Works

Source: Kalshi,

https://kalshi.com

The figure above provides an example from Kalshi. Let’s say that bitcoin is trading at $100,000 but perpetuals are trading at $101,000. Those who are long the perpetual (betting that bitcoin’s price will rise) would pay those who are short (betting that it will fall). A sustained 1% premium like this on Kalshi produces a 1% funding rate. So, a $10,000 long position would pay $100 to the short side every eight hours, and a $100,000 long position would pay $1,000. If the perpetual’s price is instead $99,000, shorts would pay longs.

Coinbase applies funding every hour using its own rate formula. Over time, the funding rate can create losses even if the price of the underlying asset is stable.

The magnitude of potential gains or losses is amplified by margin.

Coinbase, which provides access to global perpetuals, allows leverage of up to 10x on cryptocurrency (e.g., $1,000 of perpetuals for every $100 of assets in your account) in the U.S. A page on the “Learn” section of Coinbase’s website lists a cap of up to 100x leverage, but it does not share further details. Kalshi caps bitcoin leverage at 6x (e.g., $600 of perpetuals for every $60 of assets). Both Coinbase and Kalshi will close your position if your maintenance margin becomes too small.

To compound matters, the perpetuals market is open 24 hours, like the cryptocurrency markets. This has the potential to lead to big overnight moves. It also increases the potential for funding rates to be applied more due to periods with lighter trading volume.

The combination of volatile price movement and funding costs increases the odds of this occurring, especially for those not constantly monitoring their accounts. The closing of the position in this instance would likely lock in a loss.

Subscribe now

Margin is frequently used to trade futures contracts. When it is, a margin maintenance account is required. Should a futures contract move enough in price to make the account insufficiently funded, a margin call would occur. These calls typically occur at the end of the day, though they can occur on an intraday basis if there is enough volatility. Futures contracts, unlike perpetuals, do not trade on a 24/7 basis.

Proponents of perpetuals say that these contracts allow long-term holders of cryptocurrencies to hedge their positions. While this is true, Kalshi and Coinbase both describe perpetuals as allowing people to trade the price of cryptocurrencies “without ever owning them.” Moreover, the combination of volatility, funding costs and 24/7 trading makes it too easy to lose money. Taken together, perpetuals look more like a gambling instrument than a financial instrument.

More on AAII.com

• Bitcoin and Beyond: Your Options for Investing in Crypto
  The world of cryptocurrency continues to evolve as it garners mainstream acceptance from governments, traditional financial institutions and investors.

• Navigating the Rise of Prediction Markets
  Participating in prediction markets should be regarded as speculative due to their binary outcomes, novel nature, evolving regulation, relatively high costs and low liquidity.

• Economic Moats: The Engine Behind Long-Term Earnings Power
  The June 2026 AAII Journal discusses why sustainable value creation requires a competitive advantage that has both magnitude and duration.

  
  AAII Sentiment Survey

Optimism among individual investors about the short-term outlook for stocks increased in the latest AAII Sentiment Survey. Meanwhile, neutral sentiment and pessimism decreased.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 8.4 percentage points to 44.9%. Bullish sentiment is above its historical average of 37.5% for the first time in six weeks.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, decreased 5.1 percentage points to 18.9%. Neutral sentiment is unusually low and is below its historical average of 31.5% for the 101st time in 103 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, decreased 3.2 percentage points to 36.1%. Bearish sentiment is above its historical average of 31.0% for the 20th consecutive week.

The bull-bear spread (bullish minus bearish sentiment) increased 11.6 percentage points to 8.8%. The bull-bear spread is above its historical average of 6.5% for the second time in 20 weeks.

This week’s special question asked AAII members how the memorandum of understanding between the U.S. and Iran has influenced their economic expectations.

Here is how they responded:

• Makes me more pessimistic: 31.2%

• No impact/little impact: 34.4%

• Makes me more optimistic: 27.4%

• Not sure/no opinion: 7.0%

This week’s Sentiment Survey results:

Bullish: 44.9%, up 8.4 points
Neutral: 18.9%, down 5.1 points
Bearish: 36.1%, down 3.2 points

Historical averages:

Bullish: 37.5%
Neutral: 31.5%
Bearish: 31.0%

See more Sentiment Survey results.

AAII Asset Allocation Survey

Individual investors’ allocations to stocks increased while bond and cash allocations decreased in the May AAII Asset Allocation Survey.

Stock and stock fund allocations increased 1.3 percentage points to 69.8%. Stock and stock fund allocations are above their historical average of 61.5% for the 72nd consecutive month.

Bond and bond fund allocations decreased 0.7 percentage points to 14.9%. Bond and bond fund allocations are below their historical average of 16.0% for the seventh time in eight months.

Cash allocations decreased 0.6 percentage points to 15.3%. Cash allocations are below their historical average of 22.5% for the 42nd consecutive month.

May AAII Asset Allocation Survey results:

• Stocks and Stock Funds: 69.8%, up 1.3 percentage points

• Bonds and Bond Funds: 14.9%, down 0.7 percentage points

• Cash: 15.3%, down 0.6 percentage points

May AAII Asset Allocation Details:

• Stocks: 32.0%, up 2.4 percentage points

• Stocks Funds: 37.8%, down 1.2 percentage points

• Bonds: 4.0%, down 0.6 percentage points

• Bond Funds: 11.0%, down 0.0 percentage points

Historical averages:

• Stocks/Stock Funds: 61.5%

• Bonds/Bond Funds: 16.0%

• Cash: 22.5%

Take the Asset Allocation Survey.

Subscribe now

Charles Rotblut leads a class in AAII’s new Essential Investing Video Course. Go to https://www.aaii.com/ves for more information and to subscribe.

Featured Tickers: CTSH, GASS, GOOGL, PARR, PRI, WLDN

• A+ Investor Grades identify stocks ranking highly on value, growth, momentum, quality, and earnings estimate revisions

• The Platinum 30 serves as a dynamic short list of high-potential stocks

• Examining the top stocks from eight AAII strategies can help build a diversified portfolio
  

Read more

Charles Rotblut leads a class in AAII’s new Essential Investing Video Course. Go to https://www.aaii.com/ves for more information and to subscribe.

Featured Tickers:JPM

• Defines stablecoins, including their dollar-pegged dominance and global adoption

• Explains key uses in trading, payments, borrowing and inflation protection in unstable economies

• Covers future payment potential, regulatory rules, risks and differences from bank-issued deposit tokens

Read more

Pessimism among individual investors about the short-term outlook for stocks decreased in the latest AAII Sentiment Survey. Meanwhile, optimism and neutral sentiment increased.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 6.2 percentage points to 36.6%. Bullish sentiment is below its historical average of 37.5% for the fifth consecutive week.

Subscribe now

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased 2.1 percentage points to 24.1%. Neutral sentiment is below its historical average of 31.5% for the 100th time in 102 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, decreased 8.3 percentage points to 39.4%. Bearish sentiment is above its historical average of 31.0% for the 19th consecutive week.

The bull-bear spread (bullish minus bearish sentiment) increased 14.5 percentage points to –2.8%. The bull-bear spread is below its historical average of 6.5% for the 18th time in 19 weeks.

Subscribe now

This week’s special question asked AAII members which market-capitalization style of stocks they expect to outperform over the next six months.

Here is how they responded:

• Small-cap stocks: 27.1%

• Large-cap stocks: 25.4%

• Mid-cap stocks: 19.9%

• Not sure/no opinion: 26.5%

This week’s Sentiment Survey results:

Bullish: 36.6%, up 6.2 points
Neutral: 24.1%, up 2.1 points
Bearish: 39.4%, down 8.3 points

Historical averages:

Bullish: 37.5%
Neutral: 31.5%
Bearish: 31.0%

See more Sentiment Survey results.

Subscribe now

As a reminder, the charts of interest highlight charts and tables I’ve come across that haven’t made their way into other AAII commentaries.

Subscribe now

The FOMC Welcomes Warsh With Higher Expected Interest Rates

Warsh’s term as Fed chairman is starting with increased expectations for an interest rate hike. The so-called dot plot below shows FOMC members now expecting the federal funds target rate to be 3.8% by the end of this year. This is up from the 3.4% committee members had forecast three months ago.

Yesterday’s unanimous committee vote holds rates steady for now at a range of 3.50% to 3.75%.

Source: Federal Open Market Committee.

Among the new task forces Warsh announced yesterday was one focused on Fed communication. He believes that committee members should be less public about their interest rate expectations. Whether this means the dot plot’s days are numbered remains to be seen.

Traders Think Two Interest Rate Hikes May Occur

Following yesterday’s announcement, the CME FedWatch Tool is showing greater expectations for two interest rate hikes. The tool measures the odds traders are pricing into federal funds futures contracts. As of this afternoon, traders now think there is a 50.2% chance of interest rates being raised at least twice before the end of this year. Three months ago, those odds were just 18.0%.

Source: CME Group.

The Start of a Less Verbose FOMC?

Investment firm Payden & Rygel observed that yesterday’s FOMC statement was the shortest since 1998, outside of the 2020 emergency meeting. Payden & Rygel counted just 114 words. This compares to 244 words in the April 2026 statement—the last one issued under Jerome Powell’s term as Fed chairman.

What does this mean for investors and the markets? It is too early to tell. Still, given Warsh’s desire to communicate less, it is interesting.

The Yield Curve Has Steepened and Risen

Two things have happened to the Treasury yield curve since the Iran war started. First, interest rates have risen across most maturities. Second, the yield curve has stopped being inverted. This change is particularly noticeable in the middle part of the curve, with two-year through 10-year yields making the biggest upward moves.

The changes are good if you are a saver, but bad if you are a borrower.

Opening the Strait of Hormuz Will Relieve a Big Bottleneck

The U.S. and Iran’s memorandum of understanding calls for the Strait of Hormuz to be opened with no tolls charged for the next 60 days.

Regardless of what you think about the agreement’s terms, the strait’s closure has led to a massive bottleneck, as shown in the chart below from the New York Times. The big space between the top dotted line and where the columns appear at the bottom illustrates how proportionately little traffic has crossed the strait in recent months.

An average of approximately 108 ships crossed the Strait of Hormuz every day before the Iran war. It’s been about four weeks since more than 10 known ships have crossed the strait on a single day.

We don’t know which ships will cross the strait first once it finally opens. Some reports suggest that oil tankers will get priority. Even if they do, it will take considerable time for global energy supplies to be rebuilt.

Mortgage Rates Near Nine-Month Highs

Even with this week’s decline, the national average interest rate on a 30-year fixed-rate mortgage remains at levels not seen since last September. This isn’t surprising given the rise in bond yields. Nonetheless, the economic data suggests that purchase demand “is continuing to modestly improve,” according to Freddie Mac.

CEOs Are Feeling More Optimistic

Business Roundtable’s latest CEO Economic Outlook Survey shows optimism at its highest level since late 2024. Driving the gains were stronger expectations for sales and spending on capital investment. Hiring expecations barely moved and are just slightly above the breakpoint that separates growth and contraction. Responses to this survey were collected between June 2 and June 12.

Source: Business Roundtable.

More on AAII.com

• Identifying Future Economic Changes With the Yield Curve
  A positive, upward-sloping yield curve is a sign of economic expansion. A negative, inverted yield curve is a harbinger of economic contraction.

• The Fed Model’s Role in Market Valuation and Sentiment Analysis
  The Fed Model offers a simple and intuitive way to compare stock and bond valuations, but its theoretical and practical weaknesses need to be understood.

• 2026 Robo-Advice Landscape: Survivors Search for the Next Leg of Growth
  The June 2026 AAII Journal reports that with most early adopters already established as clients, robo-advice platforms compete on scale, pricing, planning depth and customization.

  Subscribe now

AAII Sentiment Survey

Pessimism among individual investors about the short-term outlook for stocks decreased in the latest AAII Sentiment Survey. Meanwhile, optimism and neutral sentiment increased.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 6.2 percentage points to 36.6%. Bullish sentiment is below its historical average of 37.5% for the fifth consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased 2.1 percentage points to 24.1%. Neutral sentiment is below its historical average of 31.5% for the 100th time in 102 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, decreased 8.3 percentage points to 39.4%. Bearish sentiment is above its historical average of 31.0% for the 19th consecutive week.

The bull-bear spread (bullish minus bearish sentiment) increased 14.5 percentage points to –2.8%. The bull-bear spread is below its historical average of 6.5% for the 18th time in 19 weeks.

This week’s special question asked AAII members which market-capitalization style of stocks they expect to outperform over the next six months.

Here is how they responded:

• Small-cap stocks: 27.1%

• Large-cap stocks: 25.4%

• Mid-cap stocks: 19.9%

• Not sure/no opinion: 26.5%

This week’s Sentiment Survey results:

Bullish: 36.6%, up 6.2 points
Neutral: 24.1%, up 2.1 points
Bearish: 39.4%, down 8.3 points

Historical averages:

Bullish: 37.5%
Neutral: 31.5%
Bearish: 31.0%

See more Sentiment Survey results.

AAII Asset Allocation Survey

Individual investors’ allocations to stocks increased while bond and cash allocations decreased in the May AAII Asset Allocation Survey.

Stock and stock fund allocations increased 1.3 percentage points to 69.8%. Stock and stock fund allocations are above their historical average of 61.5% for the 72nd consecutive month.

Bond and bond fund allocations decreased 0.7 percentage points to 14.9%. Bond and bond fund allocations are below their historical average of 16.0% for the seventh time in eight months.

Cash allocations decreased 0.6 percentage points to 15.3%. Cash allocations are below their historical average of 22.5% for the 42nd consecutive month.

May AAII Asset Allocation Survey results:

• Stocks and Stock Funds: 69.8%, up 1.3 percentage points

• Bonds and Bond Funds: 14.9%, down 0.7 percentage points

• Cash: 15.3%, down 0.6 percentage points

May AAII Asset Allocation Details:

• Stocks: 32.0%, up 2.4 percentage points

• Stocks Funds: 37.8%, down 1.2 percentage points

• Bonds: 4.0%, down 0.6 percentage points

• Bond Funds: 11.0%, down 0.0 percentage points

Historical averages:

• Stocks/Stock Funds: 61.5%

• Bonds/Bond Funds: 16.0%

• Cash: 22.5%

Take the Asset Allocation Survey.

Subscribe now

This week, we present AAII’s strategy that explores the basics of cash flow analysis and the implementation of a price-to-free-cash-flow (P/FCF) screen. Low price-to-free-cash-flow ratios may represent neglected firms trading at attractive prices. Our screen looks for companies with a price-to-free-cash-flow ratio below the median for their industry and below the company’s own five-year average. The AAII Price-to-Free-Cash-Flow screen has shown impressive long-term performance, with an average annual gain of 16.6% since inception in 1998, versus the S&P 500 index’s 7.6% return over the same period.

Seeking Free Cash Flow Generation

Cash generation is “king” for many investors selecting stocks. Earnings, dividends and asset values may be important factors, but it is ultimately a company’s ability to generate cash that fuels the growth in these factors. Strong cash flow allows a company to increase dividends, develop new products, enter new markets, pay off liabilities, buy back shares and even become an acquisition target.

Earnings and earnings multiples dominate standard measures of firm performance and stock price valuation. However, slight accounting differences make it difficult to track earnings over time or between firms. Actual cash flow is free from many of these problems of comparability across firms and consistency over time.

Subscribe now

Traditional Cash Flow Measures

Cash flow has traditionally been calculated by adding noncash expenses back to earnings after taxes and subtracting dividend payments. Noncash expenses such as depreciation, amortization and depletion are taxable expenses that appear on the income statement but require no cash outlays. They represent the accountant’s attempt to measure the reduction of the book value of assets as the assets are depleted. While dividends are a discretionary item, they are a real cash outlay that is not tax-deductible and is not reflected in earnings. Subtracting dividends and adding back noncash expenses to earnings provides an estimate of cash flow.

This widely used cash flow estimate has many weaknesses that arise out of the use of accrual accounting for the calculation of the income statement. Accrual accounting attempts to match expenses to revenues when the revenues can be expected to be recognized. For example, cash used to build up inventory will not be reflected as an expense on the income statement until the inventory is sold. But even then, the recognition of this inventory cost may vary from firm to firm if one company uses a last in, first out (LIFO) method to measure the cost of inventory sold while another firm uses a first in, first out (FIFO) method. Higher sales may not translate into higher cash flow if accounts receivable are allowed to grow faster than sales. Prepaid expenses such as income taxes and software development costs may not flow through the income statement when the costs are incurred. On the other hand, much like a personal checkbook, cash accounting tracks cash inflows and outflows directly when they actually occur.

Accrual accounting introduces many interpretations and estimates by management into the financial statements. Decisions regarding the capitalization of expenses, the recognition of revenue, the creation of reserves against losses and the write-off of assets are examples of just a few of the factors that may vary from firm to firm. Many of these issues are factors that relate to the “quality” of a firm’s earnings. Since the traditional cash flow estimate is tied directly to earnings with few adjustments, it represents a weak estimate of the firm’s actual cash flow.

Statement of Cash Flow

Companies have been required to provide a statement of cash flow since 1987. The purpose of the statement is to disclose information about the events that affected cash during an accounting period. The statement looks at the changes in the levels of cash directly, eliminating many of the weaknesses with the traditional estimate of cash flow.

The statement divides company uses and sources of cash into three primary segments—operating, investing and financing cash flows.

• The operating cash flow segment is designed to measure a company’s ability to generate cash from day-to-day operations as it provides goods and services to its customers. It considers factors such as cash from the collection of accounts receivable, cash incurred to produce any goods or services, payments made to suppliers, labor costs, taxes and interest payments. A positive cash flow from operations implies that a firm was able to generate enough cash from continuing operations without the need for additional funds. A negative cash flow from operations indicates that additional cash inflows were required for day-to-day operations of the firm.

• The investing segment of the cash flow statement attempts to capture the company’s investment in the long-term capital of the firm. Factors recorded in this segment can include purchases of property, plant and equipment; investment or sale of marketable securities; and investments or divestitures in unconsolidated subsidiaries. Negative cash flow from investing activities indicates that the company made additional long-term investments in its long-term assets or outside investments. Positive cash flow from investing activities indicates a divestiture or sale of the firm’s long-term assets.

• The financing segment of the cash flow statement examines how the company finances its endeavors and how it rewards its shareholders through dividend payments. Factors such as cash received from the issuance of new shares of stock or debt, payment of dividends to stockholders and the cash used to repurchase stocks to retire debt are summarized in this segment. Note that interest payments are considered part of normal operational expenses and are factored into the operating segment, not the financing segment, of the cash flow statement. The financing segment also often examines the impact of foreign currency translation.

  Subscribe now

Free Cash Flow

Ideally, a company should not only cover the costs of producing its goods and services but also produce excess cash flow for its shareholders. Cash flow from operations represents a good starting point for this type of analysis. However, beyond current production, a growing company must reinvest its cash to maintain its operations and expand. While management may neglect capital expenditures (capex) in the short term, there are fundamental, negative long-term growth implications to such neglect. Optimally, one would use the capex required to sustain the health of the company, but that is a highly subjective figure that will not appear as a line item on the financial statement. Actual capex serves as a proxy measure of this sustained investment in the company’s present and future operations.

Free cash flow refines the measure of cash flow from operations by considering capex and dividend payments to shareholders. While you can argue that dividend payments are not required, they are expected by shareholders, and they are paid in cash, so they must be subtracted from cash flow to calculate a free cash flow figure. Free cash flow is calculated by subtracting capex and dividend payments from cash flow from operations.

This free cash flow figure is considered to be excess cash flow that the company can use as it deems most beneficial. With strong free cash flow, debt can be retired, new products can be developed, stock can be repurchased and dividend payments can be increased.

Members are looking for your input. Can you help with this question from the Stock Screening & Analysis Community?

Do you apply free-cash-flow analysis when evaluating stocks for strong long-term cash-generating potential? Why or why not?

Click here and then choose the Join Community button on the right to answer this question or read their responses.

The Screening Criteria

A screen for positive and consistent free cash flow is a good starting point for the investor scanning for firms on a cash flow basis. The first screen requires a market capitalization greater than or equal to $50 million. This restriction excludes small stocks with poor trading liquidity.

The next screening factor excludes financial firms. Stock Investor Pro, AAII’s fundamental stock screening and research database, calculates free cash flow by subtracting capex and dividends from operating cash flow on the cash flow statement. Financial firms do not typically have large expenditures in brick-and-mortar property, plant and equipment. However, they make significant investments in marketable securities, which are not considered in the standard free cash flow calculation. When looking at the cash flow of a financial firm, it would be best to examine total cash flow figures from the statement of cash flows.

The screen then requires positive free cash flow for each of the last five fiscal years and the most recent 12 months. Ideally, a company would always have positive and increasing free cash flow. However, cyclical firms and companies with long development and construction cycles may have periods of slow sales, inventory buildup and strong capex that occur over the normal course of business. A firm that has a long development cycle for new products, a long ramp-up period when starting production, and an extended and expensive product construction cycle may show negative free cash flow until it starts to deliver a larger quantity of its products. These types of firms may be excluded by a requirement of positive cash flow for each year. If you are interested in screening for these types of firms, you may average the free cash flow over a period of years and require this average to be strong.

Higher free cash flows should translate into higher stock prices. The ratio of stock price to free cash flow per share is a method by which to judge value. Comparing a company’s price-to-free-cash-flow ratio to those of other companies, industry norms and historical averages provides some feel for relative value, much like the traditional price-earnings (P/E) ratio. Low price-to-free-cash-flow ratios may represent neglected firms at attractive prices. Our screen looks for companies with a price-to-free-cash-flow ratio below the median for their industry and below their own five-year average.

Conclusion

The analysis of a company’s cash flow is very revealing. The free cash flow measure highlights the effective management of overall company operations, including factors such as sales, inventory control, production and employee costs, accounts receivable management, interest payment levels, product development, and capex. Screening for firms with attractive levels of price to free cash flow provides a useful technique to highlight more mature value stocks worthy of further study. However, as with all preliminary screens, a study of the annual report and an understanding of the company, its products and its industry are required.

30 Stocks Passing the Price-to-Free-Cash-Flow Screen (Ranked by P/FCF Ratio)

Keep in mind that no matter how well a stock screening methodology has performed (or how badly it has underperformed) over the long term, stock screening is only the first step in the stock selection process. You will want to do your homework to see why these companies are at their current levels. Only then will you gain insight into those that will continue to languish and those that may eventually flourish.

The stocks meeting the criteria of the approach do not represent a “recommended” or “buy” list. It is important to perform due diligence to verify the financial strength of the passing companies and to identify those stocks that match your investing tolerances and constraints before committing your investment dollars. Keep in mind that the quantitative screens AAII has developed are based upon our interpretations of published works tied to the market gurus.

Subscribe now

• Earnings estimate revisions reveal business momentum and can highlight stocks likely to outperform expectations

• AAII’s scoring system helps evaluate earnings surprises and stock prospects

• How to use revisions data and AAII tools to improve stock selection and investing strategies

Read more

Featured Tickers: AAL, LOAR

• Earnings expectations drive stock prices, and even small estimate changes significantly impact valuations

• Earnings surprises and analyst revisions can predict future stock performance and create investment opportunities

• Estimate revisions screens help identify outperforming stocks and avoid underperformers

Read more

Pessimism among individual investors about the short-term outlook for stocks increased in the latest AAII Sentiment Survey. Meanwhile, optimism and neutral sentiment decreased.

Bullish sentiment, expectations that stock prices will rise over the next six months, decreased 5.9 percentage points to 30.4%. Bullish sentiment is below its historical average of 37.5% for the fourth consecutive week.

Subscribe now

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, decreased 4.8 percentage points to 22.0%. Neutral sentiment is unusually low and is below its historical average of 31.5% for the 99th time in 101 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, increased 10.7 percentage points to 47.7%. Bearish sentiment is unusually high and is above its historical average of 31.0% for the 18th consecutive week.

The bull-bear spread (bullish minus bearish sentiment) decreased 16.6 percentage points to –17.3%. The bull-bear spread is unusually low for the first time since March and is below its historical average of 6.5% for the 17th time in 18 weeks.

Subscribe now

This week’s special question asked AAII members if there is a bubble in stocks related to artificial intelligence (AI).

Here is how they responded:

• Yes, there is a bubble in AI-related stocks: 36.3%

• Some, but not all, AI-related stocks are too expensively valued: 51.5%

• No, there isn’t a bubble in AI-related stocks: 7.4%

• Not sure/no opinion: 4.9%

This week’s Sentiment Survey results:

Bullish: 30.4%, down 5.9 points
Neutral: 22.0%, down 4.8 points
Bearish: 47.7%, up 10.7 points

Historical averages:

Bullish: 37.5%
Neutral: 31.5%
Bearish: 31.0%
See more Sentiment Survey results.

Subscribe now

Concentration in the S&P 500 index is back near its highest level in decades. As of the close on Tuesday, June 9, 2026, the index’s 10 largest constituents by market capitalization comprised 41.5% of its total market cap.

Those companies, from largest to smallest, are: Nvidia Corp. (NVDA), Apple Inc. (AAPL), Alphabet Inc. (GOOGL), Alphabet Inc. (GOOG), Microsoft Corp. (MSFT), Amazon.com Inc. (AMZN), Broadcom Inc. (AVGO), Tesla Inc. (TSLA), Meta Platforms Inc. (META) and Micron Technology Inc. (MU). Eight of these 10 constituents are in the information technology or communication services sectors. Amazon and Tesla, which have aspects of a technology company, belong to the consumer discretionary sector. (S&P Dow Jones Indices lists the two Alphabet share classes as separate constituents.

Subscribe now

This high level of concentration continues to drive the S&P 500’s performance. It also distorts how the index and its typical constituent are performing. This becomes obvious when we compare iShares Core S&P 500 ETF (IVV) to Invesco S&P 500 Equal Weight ETF (RSP). The two exchange-traded funds (ETFs) hold the same stocks but allocate their portfolios differently. The latter, as its name implies, rebalances quarterly to weight each of the S&P 500’s stocks equally.

Over the past three months, iShares Core S&P 500 has outperformed Invesco S&P 500 Equal Weight by 2.2 percentage points (9.4% versus 7.2%).

Source: AAII.com and QuoteMedia. Data as of 6/11/2026.

The differences go well beyond performance. The median price-earnings (P/E) ratio for the 10 largest S&P 500 constituents is higher than the median price-earnings ratio for all other S&P 500 constituents on a trailing and forward basis.

The median dividend yield for the 10 largest constituents is lower than that of the other S&P 500 stocks. The 10 largest constituents’ median return on invested capital (ROIC), which factors in both equity and debt, is significantly stronger than that of the other S&P 500 stocks. The median future five-year earnings growth rate projected by analysts for the 10 largest constituents is nearly double the median projected growth rate for all the other S&P 500 constituents.

These numbers are not surprising given the types of companies leading the S&P 500. How you perceive these numbers depends on the type of strategy you follow. Growth investors might view the higher valuations as acceptable given the stronger growth rates and larger returns on invested capital. Value investors will scoff at the price-earnings ratios, while income-seeking investors will view the median yield paid by the biggest stocks as paltry.

If you are concerned about the high level of concentration in the S&P 500, there are a few things you can do.

• Change how you allocate to large-cap stocks. Seek large-cap ETFs or mutual funds that are focused on value or dividends, such as iShares MSCI USA Value Factor ETF (VLUE) or Vanguard High Dividend Yield ETF (VYM). MSCI USA Value Factor has very strong A+ Investor Grades for its one-, three- and five-year performance. Vanguard High Dividend Yield has performed well compared to other large dividend ETFs. Other options include the previously mentioned Invesco S&P 500 Equal Weight and other funds that do not weight based on largest-to-smallest market cap. Note that large-cap momentum and high-beta ETFs currently overweight technology and technology-adjacent stocks.

• Add exposure to small-cap stocks, or increase your current exposure. Small-cap stocks, especially small-cap value stocks, continue to trade at historically low valuations relative to large-cap stocks. Vanguard Russell 2000 Value ETF (VTWV) has A+ Investor Grades of A (very strong) or B (strong) for its one-, three- and five-year returns.

• Go international. International stocks trade at lower valuations than their U.S. counterparts. Historically, international stocks have gone through periods of outperformance and underperformance relative to U.S. stocks. Currently, international stocks have endured an unusually long period of underperformance, which could set them up to outperform going forward. Schwab International Equity ETF (SCHF) has good A+ Investor Grades for its one-, three- and five-year returns.

More on AAII.com

• Revisiting the Use of ETFs to Construct an S&P 500 Portfolio
  Comparing the performance of an equally weighted sector portfolio against an S&P 500 index fund over a 20-year period.

• Freedom-Focused Emerging Markets Fund Taps Into Local Growth
  Freedom weighting results in lower autocracy risk and more sustainable growth in emerging markets.

• Mapping the Safe Zone of Retirement Withdrawal Rates
  The June 2026 AAII Journal includes an analysis of three retirement portfolios over 100 years that addresses the tension between portfolio longevity and lifestyle goals.
  AAII Sentiment Survey

Pessimism among individual investors about the short-term outlook for stocks increased in the latest AAII Sentiment Survey. Meanwhile, optimism and neutral sentiment decreased.

Subscribe now

Bullish sentiment, expectations that stock prices will rise over the next six months, decreased 5.9 percentage points to 30.4%. Bullish sentiment is below its historical average of 37.5% for the fourth consecutive week.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, decreased 4.8 percentage points to 22.0%. Neutral sentiment is unusually low and is below its historical average of 31.5% for the 99th time in 101 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, increased 10.7 percentage points to 47.7%. Bearish sentiment is unusually high and is above its historical average of 31.0% for the 18th consecutive week.

The bull-bear spread (bullish minus bearish sentiment) decreased 16.6 percentage points to –17.3%. The bull-bear spread is unusually low for the first time since March and is below its historical average of 6.5% for the 17th time in 18 weeks.

This week’s special question asked AAII members if there is a bubble in stocks related to artificial intelligence (AI).

Here is how they responded:

• Yes, there is a bubble in AI-related stocks: 36.3%

• Some, but not all, AI-related stocks are too expensively valued: 51.5%

• No, there isn’t a bubble in AI-related stocks: 7.4%

• Not sure/no opinion: 4.9%

This week’s Sentiment Survey results:

Bullish: 30.4%, down 5.9 points
Neutral: 22.0%, down 4.8 points
Bearish: 47.7%, up 10.7 points

Historical averages:

Bullish: 37.5%
Neutral: 31.5%
Bearish: 31.0%

See more Sentiment Survey results.

AAII Asset Allocation Survey

Individual investors’ allocations to stocks increased while bond and cash allocations decreased in the May AAII Asset Allocation Survey.

Stock and stock fund allocations increased 1.3 percentage points to 69.8%. Stock and stock fund allocations are above their historical average of 61.5% for the 72nd consecutive month.

Bond and bond fund allocations decreased 0.7 percentage points to 14.9%. Bond and bond fund allocations are below their historical average of 16.0% for the seventh time in eight months.

Cash allocations decreased 0.6 percentage points to 15.3%. Cash allocations are below their historical average of 22.5% for the 42nd consecutive month.

May AAII Asset Allocation Survey results:

• Stocks and Stock Funds: 69.8%, up 1.3 percentage points

• Bonds and Bond Funds: 14.9%, down 0.7 percentage points

• Cash: 15.3%, down 0.6 percentage points

May AAII Asset Allocation Details:

• Stocks: 32.0%, up 2.4 percentage points

• Stocks Funds: 37.8%, down 1.2 percentage points

• Bonds: 4.0%, down 0.6 percentage points

• Bond Funds: 11.0%, down 0.0 percentage points

Historical averages:

• Stocks/Stock Funds: 61.5%

• Bonds/Bond Funds: 16.0%

• Cash: 22.5%

  Subscribe now

• Addresses balancing two retirement fears: running out of money vs. missing out on desired lifestyle

• Analyzes withdrawal rates from 3% to 8%, showing generally safe levels before risk increases and ending balances fall

• Emphasizes disciplined investing, patience and sticking to allocations as key to sustaining retirement income

There are two common fears tha…

Read more

Featured Tickers: BLK, JPM, WLTH

• Robo-advice industry trends include consolidation, pricing pressure and challenges serving smaller accounts profitably

• Top-performing robo-advisers over various periods, with their strengths and features

• How portfolio allocation—especially U.S. large-cap exposure—has driven short- and long-term robo-adviser performance

Condo…

Read more

Pessimism among individual investors about the short-term outlook for stocks decreased in the latest AAII Sentiment Survey. Meanwhile, optimism and neutral sentiment increased.

Bullish sentiment, expectations that stock prices will rise over the next six months, increased 0.7 percentage points to 36.3%. Bullish sentiment is below its historical average of 37.5% for the third consecutive week.

Subscribe now

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased 4.1 percentage points to 26.7%. Neutral sentiment is below its historical average of 31.5% for the 98th time in 100 weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, decreased 4.9 percentage points to 37.0%. Bearish sentiment is above its historical average of 31.0% for the 17th consecutive week.

The bull-bear spread (bullish minus bearish sentiment) increased 5.6 percentage points to –0.7%. The bull-bear spread is below its historical average of 6.5% for the 16th time in 17 weeks.

Subscribe now

This week’s special question asked AAII members which factor is most influencing their six-month outlook for stocks.

Here is how they responded:

• The economy and/or inflation: 34.8%

• Geopolitics: 33.6%

• Valuations: 16.4%

• Monetary policy/interest rates: 9.6%

• Other: 5.6%

This week’s Sentiment Survey results:

Bullish: 36.3%, up 0.7 points
Neutral: 26.7%, up 4.1 points
Bearish: 37.0%, down 4.9 points

Historical averages:

Bullish: 37.5%
Neutral: 31.5%
Bearish: 31.0%

See more Sentiment Survey results.

Subscribe now