A trader works at his desk on the floor of the New York Stock Exchange at the opening bell on July 18, 2025.
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The latest gauge of investor sentiment is rife with uneasiness. Counterintuitively, some market strategists think that could be a bullish sign that forces traders to get back into the market and drive stocks higher.
Bearish individual investor sentiment toward stocks over the next six months rose more than 10 percentage points, the most since February, in the latest weekly survey by the American Association of Individual Investors.
More than two-fifths of investors polled, or 43.2%, are now negative on how stocks will perform through the early part of next year, up from 33% last week. The 10.2-point rise was the most since a 20-point increase shortly after the S&P 500 reached a then-record high on Feb. 19.
According to Bespoke Investment Group, the week ending Aug. 6 was just the fourth period since the bull market began in October 2022 that bearish sentiment had a 10-point weekly increase.
“The AAII numbers can be volatile at times, and this survey, whether it’s due to an older cohort or some other factor tends to be more negative than others,” Bespoke co-founder Paul Hickey told CNBC. “I’ll be the first to say that certain sectors of the market have gotten frothy, but there’s also a non-trivial contingent of people we talk to who are increasingly worried that things are about to fall apart, and that’s not usually the sentiment you see around peaks.”
Source: AAII Sentiment Survey
Investor sentiment is viewed by many as a contrarian indicator. The idea is that when investors are bearish, they are more likely to have already sold stocks and have more cash on hand to put to work. And when more are bullish, the reverse is true.
“If the poll is bearish, that is encouraging,” Sam Stovall, chief investment strategist at CFRA Research, said in an email to CNBC. “The institutional investor (smart) money tends to look at retail investors as ‘dumb money’ and tends to make near-term price performance projections accordingly.”
Although market volatility has dramatically lowered since the start of the year, a series of negative news and data releases — such as tariff hikes on top trading partners, threats on pharmaceutical tariffs, the Federal Reserve’s decision to maintain rates and a weak July jobs report — have weighed on sentiment and kept investors wary of high valuations at bay.
At the same time, stocks have chugged along, driven by strength in corporate earnings results and consumer spending, artificial intelligence enthusiasm, technical strength and more. The three major U.S. indexes are each in the green for the year and are tracking for a weekly gain.