The PNC-CivicScience Investor Sentiment Index (“ISI”) is a “living,” survey-based measurement of U.S. adults’ current attitudes and expectations related to the U.S. financial markets, investment climate, and market outlook. The primary goal of the ISI is to monitor changes in consumer and investor attitudes, to better anticipate investment trends, market movements, and overall U.S. economic health.
A Snippet of Our Latest Reading:
In March 2018, for the second month in a row, the PNC – CivicScience Investor Sentiment Index (PNC – CivicScience ISI) reflected a softening in confidence. Investor optimism, as measured by the poll, had been steadily rising from September 2017 through January 2018. A sharp turn lower was recorded in last month’s reading, with further easing in March.
After sentiment in January reached the highest level reading since the poll began in November 2016, February’s results reflected a shift in expectations. March 2018’s poll results further highlighted a more cautious view, as the PNC – CS ISI declined to 50.4 from 52.3 for February. Softening optimism, in our view, follows how the broader market has traded, as volatility returned to the financial markets in February and continued into March. Numerous headlines led to market jitters and put downward pressure on U.S. stocks. Despite the continued strong economic data and corporate earnings, political headlines, Information Technology (Tech ) sector scrutiny, and worries over potential trade wars kept market volatility elevated through March.
It is normal for stocks to experience declines from time to time, and U.S. equities had gone longer than normal without any type of correction. The S&P 500 dropped 10% after hitting a record on January 26, 2018, through February 8, 2018. Following this decline, stocks initially recovered, but trade war tensions and Facebook privacy controversy which precipitated a Tech selloff have kept markets in correction territory.
Fourth – quarter 2017 earnings season concluded early in March, and the forward guidance for 2018 earnings is quite strong. The forecasted growth rate for full-year 2018 earnings for the S&P 500® is 18.5% year over year, up from the 12.0% estimate at the start of the year. Markets will get a first look at 2018 profits mid – April as the first quarter reporting season commences.
The economy continues along a path of economic expansion, with fourth – quarter 2017 GDP revised higher to 2.9% year over year. The job market remains on solid ground, as the unemployment rate held at 4.1% for another month in February and inflation remains in check. The Consumer Price Index expanded 0.1 percentage point in February to 2.2% year over year. As expected the Federal Reserve (Fed) increased interest rates by 25 basis points at the March Federal Open Market Committee Meeting. The median forecast from the Fed continues to point to a total of three hikes in 2018, which is in line with PNC’s own forecast.