Investor psychology is showing extreme bearish polarization, both among retail and professional participants.
The sharp decline in neutral sentiment suggests traders have abandoned indecision and are now leaning decisively toward fear or pessimism.
Newsletter writers—typically considered seasoned market observers—are now registering sentiment levels last seen during the 2008 financial crisis, suggesting deeper structural anxieties.
Still, history shows that such extreme sentiment often coincides with market bottoming conditions, implying that a potential medium-term rebound cannot be ruled out.
Core Sell Point
Extremely bearish sentiment and near-record low neutrality highlight a market gripped by fear—while this reflects downside risk, it could also be a contrarian signal for a rebound, if catalysts emerge.
Investor sentiment has remained deeply negative, even before last week’s extreme volatility. When the S&P 500 hit an all-time high in mid-February, only 29.2% of respondents in the AAII survey reported bullish sentiment. That figure fell to the 19% range in the following weeks and now sits at 28.5%, barely improved despite intense market moves.
Bearish sentiment, by contrast, is sharply elevated. From 40.5% on Feb 20, the AAII bearish response rate has jumped to 58.9%, down slightly from 61.9% last week. The number of neutral respondents is just 12.5%, among the lowest on record since the AAII survey began in 1987—only slightly above the all-time low of 11% in May 2009.
Complementing this data, the Investors Intelligence survey, which measures sentiment among newsletter writers, showed bullish sentiment dropping to 23.6%, its lowest level since December 2008. Prior to that, such low readings were last seen in July 1994, underlining the historical rarity of the current pessimism.
Importantly, the survey closed before news of U.S. tariff exemptions and the subsequent market rally, meaning the data may not fully reflect the latest developments.
Last week also ranked among the most volatile weeks in modern history. The S&P 500’s intraday spread between its high and low closes hit 12%, one of the widest ranges since 1963. This marked the 18th time that the S&P 500 experienced a 10%+ swing during a week in which it also posted a net decline.
Historically, such episodes tend to coincide with extreme sentiment lows. This week’s Investors Intelligence data confirm this pattern: bullish readings are near post-2008 crisis lows, and volatility-adjusted shifts in sentiment were more than twice the historical norm.
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