The year is only two weeks old but investors are already down in the dumps. (Tweet This)
Global equity markets kicked off 2016 on the wrong foot as concerns over a slowdown in China, as well as plunge in oil prices, have weighed. The S&P 500 has shed about 9 percent this year and has teetered in and out of correction territory, or more than 10 percent off its 52-week high, for most of the year.The Dow Jones industrial average and theNasdaq composite have fallen about 6 percent and 7 percent year to date, respectively.
Overseas, China’s benchmark Shangahi composite has plummeted nearly 15 percent for the year, while the pan-European STOXX 600index has dropped over 7 percent.
The weekly American Association of Individual Investors survey found that only 17.9 percent of investors believe stock prices will go up over the next six months, marking the lowest level of bullishness since April 2005.
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“I think the slide correctly came out of China and reflected on commodities,” said Kim Forrest, senior equity analyst at Fort Pitt Capital. “That gave investors a pause.”
Michael Arone, chief investment strategist at State Street Global Advisors, said “the market is coming to realize that emerging markets — particularly China — have contributed a significant amount of global growth [for a long time]. I think the view was that the U.S. and other advanced economies would be able to pick up the slack.”
The survey — released Thursday — also noted that bullish sentiment among investors has been below a historical average of 39 percent for 43 of the last 45 weeks, and has remained below 30 percent for seven weeks in a row.
Bearish sentiment — the expectation that stocks will fall over the next six months — has jumped to its highest levels since April 2013.
The weak investor sentiment has led to large spikes in volatility, “with emotional investors ready to shed risk assets at the slightest whiff of bad news,” Wasif Latif, head of global multi-assets at USAA, said in apost Thursday. “Good news, on the other hand, is getting shrugged away.”