AAII bearish sentiment hits one-year high as stock pullback deepens

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AAII bearish sentiment rises

Highlights

AAII's latest survey shows bearish sentiment at 53%, up 14 percentage points week-over-week, hitting its highest since May 2025.
Crude prices reaccelerate and the 10-year U.S. Treasury yield hovers near 5%, fueling caution amid ongoing Iran conflict.
Only 30% of stocks remain above their 50-day moving average, with strategists noting contrarian indicators for a potential market rebound.

Investor sentiment weakens amid oil and yield pressure

As reported by CNBC, the latest weekly survey from the American Association of Individual Investors shows about 53% of individual investors are bearish on the six-month outlook for stocks, up roughly 14 percentage points from a week earlier and the highest level since May 2025. Less than 29% describe themselves as bullish, the lowest reading in about a year, while the bullish share falls by about 10 percentage points in one week.

Main Street caution is building as crude prices reaccelerate and the 10-year U.S. Treasury yield stays near 5% in recent weeks amid the war with Iran. JPMorgan's commodities team says on Thursday it is no longer trying to forecast when or how the conflict will end.

Peter Boockvar, investment chief at One Point BFG Wealth Partners, says extreme moves in sentiment are worth watching, though he adds that the AAII survey is his least favored gauge of market mood. He also points to CNN's Fear and Greed Index moving into fear territory after showing greed only a month earlier.

Strategists see signs of a potential market rebound

Despite the sharp deterioration in sentiment, some market analysts argue the readings are nearing levels often associated with market lows. Keith Lerner, investing chief at Truist Wealth, says growing pessimism is coinciding with weak market breadth, with only 30% of stocks remaining above their 50-day moving average, a threshold that suggests the market is approaching oversold territory.

Boockvar says the AAII data, viewed from a contrarian perspective, suggests equities may be set up for a bounce. Lerner similarly says investors should not let the sentiment readings stop them from buying, arguing that the upside potential of the long-running bull market still outweighs downside risk.

He adds that the recent pullback, especially in technology shares, offers a possible entry point for investors. Although stocks rally on Thursday, the broad S&P 500 index is still tracking toward a lower finish for a second consecutive week and for the third time in five weeks.

Our earlier report on U.S. stocks heading for another weekly decline detailed how renewed inflation worries, higher oil prices, and rising Treasury yields were weighing on market mood. It also noted that strength in the Magnificent Seven was helping cushion the S&P 500 even as pressure broadened across other sectors, and flagged growing caution around positioning and the fading tailwind from policy and profits.

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