Investor sentiment has taken a sharp downturn as the stock market enters correction territory, according to the latest American Association of Individual Investors (AAII) Sentiment Survey. The S&P 500 has now dropped more than 10%, raising fears of a potential recession.
Concerns over the economy have intensified amid rising trade tensions. U.S. President Donald Trump has escalated disputes by imposing higher tariffs on China, engaging in trade conflicts with Canada and Mexico, and clashing with Europe over new reciprocal tariffs set to take effect on April 2nd.
Bearish Sentiment Hits Unprecedented Levels
With market uncertainty growing, bearish sentiment—the expectation that stock prices will decline over the next six months—has surged to 59.2%. This far exceeds the historical average of 31.0% and marks the first time ever that bearish sentiment has remained above 57% for three consecutive weeks.
Optimism Remains at Multi-Year Lows
As pessimism rises, bullish sentiment, which reflects expectations of stock price increases, has dropped slightly by 0.2 percentage points to 19.1%. This is significantly below the historical norm of 37.5%. Notably, this is the first instance since September 22, 2022, that bullish sentiment has remained under 20% for three straight weeks, when it stood at 17.7%.
Similarly, neutral sentiment—the belief that stock prices will remain steady—has declined as well, falling 1.9 percentage points to 21.7%. This remains lower than its long-term average of 31.5% and has been at unusually low levels for 34 of the past 36 weeks.
Widening Gap Between Bulls and Bears
The bull-bear spread, which is calculated by subtracting bearish sentiment from bullish sentiment, declined 2.3 percentage points to –40.1%. This is well below the historical average of 6.5% and marks the 10th time in 12 weeks that the spread has been in negative territory.
Investor Views on Market Sentiment
AAII members were also asked whether they believed the broader investor sentiment was justified. The responses were mixed:
31.9% felt that investors were being too bearish.
34.7% believed sentiment levels were appropriate.
23.9% thought investors were too optimistic.
9% had no strong opinion or were unsure.
With volatility gripping the markets and trade disputes escalating, investors remain uncertain about what lies ahead in the coming months.
