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INVESTOR GLOOM DEEPENS, BULL-BEAR GAP WIDENS SHARPLY - AAII

Investors are getting a lot more nervous about the market -- at least in the short term.

The latest American Association of Individual Investors (AAII) Sentiment Survey shows a sharp jump in pessimism, with fewer investors feeling optimistic or even neutral about where stocks are headed over the next six months.

At the same time, there’s growing skepticism around AI. Just over half of those surveyed think at least some AI-related stocks are looking too expensive.

Digging into the numbers, bearish sentiment -- the share of investors who expect stocks to fall over the next six months -- jumped 10.7 percentage points to 47.7% (highest since April 2, when it hit 51.4%). Bearish sentiment is "unusually high" and well above the long-term average of 31%. In fact, bearish sentiment has now been above average for 18 straight weeks.

On the flip side, optimism is fading. Bullish sentiment dropped 5.9 percentage points to 30.4% (lowest since March 19), marking the fourth consecutive week below its historical average of 37.5%.

Meanwhile, the “wait-and-see” crowd is shrinking. Neutral sentiment fell 4.8 percentage points to 22% and is "unusually low." It's been below its long-term norm almost continuously for the past two years.

Put it all together, and the gap between bulls and bears has widened sharply. The bull-bear spread tumbled to -17.3% from nearly flat last week, remaining well below its historical average for the 17th time in the past 18 weeks.

In short, investors are growing more cautious, less convinced about upside, and increasingly uneasy about valuations -- especially in the hottest parts of the market. And as sentiment darkens, it’s worth remembering that, at extremes, this survey is often viewed through a contrarian lens.

In this week’s special question, AAII asked members whether they see a bubble in AI-related stocks.
Here is AAII’s graphic showing how they responded.

(Terence Gabriel)

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