Individual Investors Get More Bearish as Stocks Limp

AAII gauge shows largest weekly jump in pessimistic sentiment since January 2016.

How does the individual investor view the prospects of an improving stock market up ahead? About as positively as American soccer fans regard the US’s chances of winning the World Cup next time.

Individual investor pessimism, a key gauge of the US stock market’s mood, soared this past week, capping a string of weak trading days.

This comes amid a market slide that began when the S&P 500 peaked on Jan. 26, amid concerns about rising interest rates and international trade turmoil. The index has taken a further tumble since June 12, only nudging up Thursday by 0.87%.

The bearish barometer, part of the AAII Sentiment Survey, marked the largest one-week jump in negative outlook since January 2016, Bespoke Investment Research said.

Bearish sentiment climbed to 40.8% from 26.2% the week before, showing that respondents believe stocks will fall over the next six months. This increases ends a 10-week streak of negative readings below the historical average of 30.5%, according to the American Association of Individual Investors.

At the same time, bullish sentiment took a header, plunging 10.3 percentage points to 28.4%.

Despite a still-surging economy and low unemployment, the increase in the bearish indicator may show that regular investors are growing wary of the market’s chances to overcome headwinds.

Even the tech realm and small stocks, which had been doing relatively well this year, have dipped lately. Both the tech-heavy Nasdaq Composite and the small-cap Russell 2000 have dropped over the past couple of weeks (although both blipped up Thursday).

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