The drop in gas prices should be ‘reason for hope,’ analyst says

AAII Financial Analyst & Vice President Charles Rotblut joins Yahoo Finance Live to discuss the company's investor sentiment survey and bearishness in the markets.

Video Transcript

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AKIKO FUJITA: Well, volatility has been the name of the game, as investors weigh uncertainties around the Federal Reserve's goal of achieving that soft landing. To get a sense of where investors see markets in the next six months, let's get to the American Association of Institutional Investors Financial Analyst and Vice President Charles Rotblut. Charles, it's good to talk to you today. I'm looking through some of these numbers right now in terms of where sentiment is. Talk to me about the bullish-bearish spread and what sticks out to you in terms of what you're seeing right now.

CHARLES ROTBLUT: Yeah, so the bullish-bear spread-- the bull-bear spread is really just bullish sentiment minus bearish sentiments. And so right now, it's at -28.5%. So it's very negative. And we at the American Association of Individual Investors, we started the survey back in the early '80s. So we have a very long history of this. And we basically have been measuring how many bull-- how many people are bullish and expect stocks to rise over the next six months versus bears expect stocks to fall over the next six months. And it's typically positive because typically stocks do rise over six- and 12-month periods.

But right now, it's at -28.5%. And it's actually been negative for the last 22 weeks, consecutive weeks. That's the second longest streak we've seen in the history of the survey. And I think you're seeing this ongoing concerns about the markets. Investors are concerned about interest rates. They're concerned about inflation. They're concerned about corporate earnings, the possibility of a recession.

And as you are seeing too, they're seeing high prices at the pump. They're seeing continued supply chain issues when they go shopping. So I think all those are playing a role and keeping investors concerned, particularly when you mix in the ongoing market volatility and the fact that the market is still down. I think the S&P 500 was down about 18% year to date when we opened trading this morning.

AKIKO FUJITA: Yeah. So, I mean, investors certainly not positive in their outlook. But we have seen, some would argue, some positive takeaways on the economic print that's come through. We had a guest on earlier who said that he believes that inflation could have potentially peaked. Have you seen any shift that's come with that data that's come through?

CHARLES ROTBLUT: We've seen a little bit. We started seeing bullish sentiment improve a little bit last month, but it really never got above average. And that's one thing that sticks out to us. We really haven't gotten to that point where it's above that 38.5%, or really at a point where we're seeing two out of five of our members saying, yes, I think stocks are going to rise. So it's still being a lot of cautious. And I think they are really worried about inflation.

There's always a political bent to it. We see that with other surveys of the economy, where people's politics do place their influence. But we've seen so many people say we've hit peak inflation. And then all of a sudden, it seems like inflation picks up again. So I'm not on the we've past peak inflation bandwagon yet. And I think a lot of people are still let's wait and see. But certainly, the drop in gas prices should be giving some people a reason for hope that maybe we've gone past the biggest of those big increases.

AKIKO FUJITA: Finally, Charles, we're, what, two months out from the midterm. Certainly, that's going to continue to dominate the headline between now and November. How much does politics play into the sentiment in the market?

CHARLES ROTBLUT: You know, it does. And it's not even so much the elections, but I really think it's just people's personal views. And we see this after every presidential election with the Gallup polls. The economic viewpoints of Republicans versus Democrats shifts. But I do think overall there's a frustration with politics. I think there's a frustration-- a feeling that Washington really isn't getting things done for the average consumer. And I do think a lot of our members are concerned about continued debt spending. They're concerned, obviously, what could change in the tax laws. And I think all that is playing a role as well.

AKIKO FUJITA: American Association of Individual Investors Financial Analyst and Vice President Charles Rotblut, thanks so much for joining us today.