Markets Gripped By Pessimism As Bearish Sentiment Breaks 35-Year Record, Remains Above 50% For 8 Straight Weeks

The bearish sentiment, measured by the American Association of Individual Investors (AAII) Sentiment Survey, broke a record this week as it stayed above the 50%-mark for the eighth consecutive week.

What Happened: Despite a weekly decrease in negative sentiment, the latest AAII survey showed bearishness still leading bullish and neutral views at 56.9% this week.

The bullish sentiment also declined from the previous week, while neutral sentiment rose to 17.7% from 12.5%.

AAII survey, conducted weekly from Thursday to Wednesday, noted a 2% decrease in pessimism from 58.9% to 56.9% this week; similarly, bullish sentiment also reduced by nearly 3% from 28.5% to 25.4% this week.

The bearish sentiment continues to be above 50% for the eighth straight week. The streak began on the week ended Feb. 26, when it first touched the 60.6% mark.

While the seven-week-long streak matched a 35-year-old record from October 1990, this week’s eighth week of advance broke all records.

According to Subu Trade, “This has never happened before. Not during COVID, 2008, the dot-com collapse, or the 1990 bear market.”

Why It Matters: The historical average of bearish sentiments stood at 31%, which was nearly half of the current pessimism among the participants of the AAII survey.

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Whereas, historically, the bullish participants surveyed to at 37.5% on an average.

Jeff Weniger, the head of equities at WisdomTree, shared a graph combining all the fear gauges, including VIX, AAII Bears, and Investors Intelligence survey, to conclude that the S&P 500 index always gains after a period of extreme fear.

“In 10 of the last 11 fear spikes, the S&P 500 went on to gains over the next 52 weeks. Returns were often large too (+31.0%, +21.0%, and so on),” he said.

Similarly, Puru Saxena, the founder of AlphaTarget, noted that such fearful considerations “historically led to better than average 52-week gains for U.S. stocks.”

Price Action: The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, rose in premarket on Thursday. The SPY was up 0.32% to $527.34, while the QQQ advanced 0.57% to $446.70, according to Benzinga Pro data.

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