Bulls Beat Bears For The First Time In 17 Weeks, Pessimism Drops As Bearish Sentiment Slides Below 40%

After breaking an 11-week-long streak last week of being above the 50% mark, the bearish sentiment, measured by the American Association of Individual Investors (AAII) Sentiment Survey, slipped below the 40% mark in the current week.

What Happened: Additionally, the bullish sentiment for this survey, which is conducted weekly from Thursday to Wednesday, topped the bearish sentiment for the first time in 17 weeks, since Jan. 29.

However, it was still neck and neck as bearish sentiment stood at 36.7%, whereas the bullish sentiment came in at 37.7% for the week that ended on Wednesday, May 21.

The neutral sentiment for the week stood at 25.6%, which was at its highest level in 12 weeks since Feb. 19.

As compared to last week, pessimism dropped by 7.7% from 44.4% to 36.7%. Whereas optimism increased 1.8% from 35.9% to 37.7%.

The 11-week-long bearish sentiment above 50%, which ended last week, was the highest ever, as the second-longest streak of such pessimism was last observed in 1990. The old streak was just seven weeks long.

The historical averages of bearish sentiment stood at 31%, and that of the bullish sentiments were at 37.5% among the participants of the AAII survey.

Why It Matters: This week’s special question to the AAII survey participants was “What do you think about the Federal Reserve’s decision to keep interest rates unchanged?”

To this, about 73.6% of the participants said that the Fed did the right thing by not cutting the rates, while 17.1% of the participants said that they should have cut interest rates. About 6.6% of the respondents were not sure and had no opinion, while 2.7% said that the Fed should have raised the interest rates.

The stock market has recovered since the U.S. and China decided to pause tariffs for 90 days; however, a Moody’s downgrade, rising yields, and investors’ assessment of President Donald Trump‘s proposed tax cuts in the “One, Big, Beautiful Bill” have led the market lower for the last two sessions.

On Thursday, 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, fell in premarket. The SPY was down 0.37% to $580.73, while the QQQ declined 0.37% to $511.16, according to Benzinga Pro data.

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