Bearish Sentiment in US Stocks Reaches Second-Longest Record

2 mins mins

Key Points:

Main event: Bearish sentiment in US stocks hits five-week high.
Sentiment reaches second-longest record since 1987 survey.
Hedge funds increase short selling as market sentiment shifts.

bearish-sentiment-in-us-stocks-reaches-second-longest-record — Bearish Sentiment in US Stocks Reaches Second-Longest Record

The bearish sentiment among investors in the US stock market has reached new heights, surpassing 50% for the fifth consecutive week, according to the latest American Association of Individual Investors survey held in late March.

Amid increased market volatility, this trend marks the second-longest bearish record since the survey began in 1987, stirring discussions about potential market shifts.

Bearish sentiment toward US stocks has heightened significantly, marking an important milestone as it surpasses 50% for a fifth consecutive week. This pessimism represents the second-longest continuous bearish stretch in the survey’s history since its inception in 1987.

The rising bearish sentiment correlates with Goldman Sachs data, showing hedge funds’ net selling of US stocks reaching a seven-week high. Short selling has notably exceeded buying, indicating a shift in strategy among institutional investors as they brace for market fluctuations.

Reactions from industry experts underscore the burgeoning pessimism. Paul Hickey of Bespoke Investment Group highlighted, “We’ve seen such washed out sentiment it tends to be you know things can stay volatile in the short run but over the next like six to six months to a year it’s usually a good sign.” Experts like Will Low of Nikko Asset Management note potential stabilization as major corrections unfold.

Historical Trends Offer Insight Into Market Sentiment

Did you know?
During past economic downturns, investor sentiment matched current levels, notably during the 2007-09 financial crisis and the 1990 recession, highlighting a historical arc of market uncertainty.

Historically, high levels of bearish sentiment have coincided with significant economic challenges, such as the 1990 recession and the 2007-09 financial crisis. Such occurrences have often triggered a shift in trading strategies, particularly among professional investors who typically monitor these trends.

Paul Hickey emphasized that while short-term market volatility remains, historical trends imply that such pronounced pessimism can lead to long-term stabilization. Experts suggest that monitoring both hard economic data and investor sentiment indices is crucial in anticipating future market directions.