- Bearish investor sentiment has surged to its highest level since the great financial crisis in 2009.
- The AAII weekly investor survey show the percentage of bearish respondents surged to 59%.
- The surge in bearish sentiment comes as investors grapple with rising inflation and higher interest rates.
Investors view of where the stock market goes from here is getting increasingly bearish, according to AAII's weekly investor sentiment survey.
The percentage of respondents who leaned bearish surged to 59.4% for the week ending April 27, representing the highest bearish reading for the survey since the great financial crisis in 2009, when bearish readings hit a high of about 70%.
That bearish reading represents a big jump from last week's bearish reading of 44%, as many neutral responders shifted to a more negative view in the most recent survey. The historical average of AAII's investor sentiment survey is 31% bearish and 38% bullish. Only 16% of respondents were bullish in the most recent survey.
Meanwhile, the difference between bullish respondents and bearish respondents also moved to a level not seen since March of 2009.
That bearish reading in March 2009 just so happened to mark the bottom for the stock market, which illustrates why heightened bearish investor sentiment can often serve as a contrarian buy signal for investors.
The surge in bearish sentiment comes as investors grapple with rising inflation and higher interest rates, which have put a dent into stock market valuations and tightened financial conditions for both businesses and consumers. And higher interest rates are likely to linger around for some time as expectations build for more rate hikes from the Federal Reserve.
Bullish respondents to the most recent AAII survey hit just 16%. The survey asks investors a simple question: what direction do AAII members believe the stock market will be in the next six months? The bearish reading could surge even higher in next week's results given that first-quarter US GDP results released on Thursday showed a decline of about 1%, below estimates of a 1% gain.
The AAII investor sentiment survey isn't the only sentiment indicator that shows growing bearishness in the stock market, as CNN's Fear and Greed Index has steadily trended downwards in recent weeks to 29, which represents "fear." The reading was in neutral territory just last week.
The current reading of extreme bearishness highlights just how quickly the pendulum between optimism and pessimism in the stock market can swing, given that just six months ago investors were willing to value Rivian, an electric vehicle startup with no sales, at more than $150 billion. Rivian is worth $27 billion today.
