Market Update: Investor Sentiment Hits Extreme Lows — A Bullish Signal?

After back-to-back 20% plus years of advance, a pullback and correction are both normal and healthy. So, here we are today, from the peak on 2/19, just 16 trading days ago, the S&P 500 has given back 10.04%, the Russell 1000 Growth Index has lost 13.51%, the Russell 1000 Value 6.84%, and the Russell 2000 Index of small cap stocks 12.55%.

The correction in stocks and weaker economic data, tariff whiplash, chaos in Washington, and a looming government shutdown have weighed on both consumer and investor sentiment. The American Association of Individual Investors (AAII) survey of investor sentiment recently showed that over 60% of investors are bearish and only 19% are bullish. To put that into perspective, the only other times bearish sentiment was over 60% over the past 20 years was during the Global Financial Crisis of 2008 and September 2022, as the market was bottoming. In addition, bearish sentiment has been above 55% for the third straight week. The only other time since 1987 that bearish sentiment was above that level for three weeks straight was in the three weeks ending March 4, 2009.