Above average Individual Investor pessimism persists -AAII (2023)

Key points:

  • Major U.S. indexes rise; transports, banks outperform
  • Energy leads S&P sector gainers; cons disc weakest group
  • Dollar, gold edge up; crude rises ~2%; bitcoin off ~1%
  • U.S. 10-Year Treasury yield slides to ~3.44%


Pessimism among individual investors stayed above average for the tenth-straight week in the latest American Association of Individual Investors (AAII) Sentiment Survey. With this, both optimism and neutral sentiment declined.

AAII reported that bearish sentiment, or expectations that stock prices will fall over the next six months, rose 3.4 percentage points to 38.5%. Although bearish sentiment was recently reverting closer to its historical average, it is now approaching an "unusually high" level again. Bearish sentiment is above its historical average of 31.0% for the 70th time out of the past 75 weeks.

Bullish sentiment, or expectations that stock prices will rise over the next six months, dipped by 3.1 percentage points to 24.1%. Optimism is "unusually low for the 49th time out of the past 69 weeks."

Neutral sentiment, or expectations that stock prices will stay essentially unchanged over the next six months, edged down by 0.3 percentage points to 37.4%. Neutral sentiment continues to be above its historical average for the 16th time out of the past 17 weeks.

With these changes, the bull-bear spread widened to -14.4 percentage points from -7.9 percentage points last week. The spread is at an "unusually low level for the seventh week out of the last 10 weeks":

AAII noted that market volatility continues to worry individual investors.

Additionally, AAII asked its members if they think investors are too bullish or too bearish right now. Here are their responses:

They are too bullish: 30.4%

They are too bearish: 30.4%

Their sentiment toward the market is about right: 18.6%

(Video) Making Sense of Stock Market Anomalies w/ Colin Slabach (MI254)

No opinion/Not sure: 20.6%

(Terence Gabriel)



A spate of mixed data on Friday provided market participants with lots to chew on, but did little to move the needle with respect to Fed rate hike expectations.

The Commerce Department released its broad-ranging Personal Consumption Expenditures (PCE) report for March (USPCE=ECI), and the star of that show was the Fed's pet inflation indicator, the PCE price index.

The headline number cooled substantially, both on a monthly and annual bases, to 0.1% and 4.2%, respectively.

Stripping away volatile food and energy prices, the core measure repeated February's 0.3% print and came in slightly cooler year-on-year, shedding 0.1 percentage point to 4.6%, a tad warmer than analyst expectations.

"The report shows inflation continues to move in the right direction," says Peter Cardillo, chief market economist at Spartan Capital Securities. "It’s still high but it’s something that the Fed needs to take into consideration."

"I don’t think we escape another 25 basis point rate hike at their next meeting," Cardillo adds.

Here's a look at core PCE along with other major indicators, and the distance they have yet to fall before approaching Powell & Co's average annual 2% target:

Elsewhere in the report, personal income (USGPY=ECI) grew by 0.3%, overshooting the 0.2% consensus, while consumer spending (USGPCS=ECI) was unchanged from February.

The saving rate - or the unspent portion of disposable income - gained 0.3 percentage points to 5.1%.

"Consumers' inclination to spend wasn't strong in March," writes Oren Klachkin, lead U.S. economist at Oxford Economics. "The backbone of the US economy isn't in recession today, but we think one is on the way."

"Income growth is poised to slow, lingering excess savings will run out, willingness to use credit cards will decline, and inflation won't moderate quickly," Klachkin adds.

(Video) A look ahead to next month's Budget

The saving rate is a favorite indicator of Treasury Secretary and erstwhile Fed Chair Janet Yellen, as it's widely seen as a gauge of consumer expectations, as folks are more likely to feed the piggy bank in times of economic uncertainty.

Speaking which, the mood of the American consumer has brightened a tad this month, but long-term inflation expectations were hotter than originally reported, according to the University of Michigan's (UMich) final take on March consumer sentiment (USUMSF=ECI).

The current conditions index was revised downward slightly, offsetting a slight gain in the expectations component.

But while one-year inflation expectations held firm at 4.6% (matching the annual Core PCE print, incidentally), five-year inflation expectations gained 10 basis points to 3%.

Next, employment costs - one of the main drivers of inflation and a top concern of the Fed - heated up more than analysts expected in the first three months of the year.

The employment cost index (UEMPC=ECI), which aggregates wage and benefit growth, rose by 1.2% in the first quarter versus the 1.1% consensus.

But Ian Shepherdson, chief economist at Pantheon Macroeconomics, sees that picture changing as the year progresses.

"We fully expect wage growth to slow markedly over the remainder of this year as payroll growth rolls over and unemployment rises," Shepherdson says. "More immediately, though, the Fed watches the ECI closely and these data seal the deal on 25bp hike next week."

And finally, factory activity in the Midwest has contracted at a much shallower pace this month than economists projected.

The Chicago Purchasing Managers' Index (PMI) (USCPMI=ECI) delivered a reading of 48.6,5.1 points north of expectations, although still below the magic level of 50, the dividing line between contraction and expansion.

On Monday, analysts also expect the Institute for Supply Management's nationwide PMI number to show a shallower monthly contraction in March, with consensus calling for a half-point improvement to 46.8.

(Stephen Culp)



Major U.S. averages are higher in the early stages of trading, with the Nasdaq recently erasing initial declines, as equities overcome a drop of nearly 4% in heavyweight Amazon.comAMZN.

(Video) Warren Buffett: 12 Mistakes Every Investor Makes

Amazon is the biggest drag on both the S&P 500SPXand NasdaqIXICafter the online retail giant reported quarterly results but warned of a cloud growth slowdown .

Stocks are managing to gain even after economic data showed that underlying inflation pressures remain strong, while consumer spending has leveled off.

Gains were led by MicrosoftMSFT, AppleAAPLand Exxon MobilXOM. The oil company giant posted better-than-expected earnings .

As such, energySPNis leading S&P 500 sector gains, with an additional boost from an advance in oil prices, while consumer discretionary is the weakest.

(Chuck Mikolajczak)



The Federal Reserve's inflation fight could run into an additional hurdle - a push for onshoring, or moving production of goods back or close to the U.S.

This trend, which will require more investment at a time when interest rate hikes are raising the cost of capital and could result in increased inflationary pressures but the adoption of AI technology could potentially offset this, said Stefan Rust, founder and CEO at data aggregator Truflation.

"Technology has the potential to be the saving grace with artificial intelligence providing significant productivity gains that could counter the rising cost of capital," Rust told the Reuters Global Markets Forum.

He pointed to how growth in computing power, the internet, and mobile data access has increased productivity at a reduced cost in the past as a potential blueprint for AI's impact on costs.

AI remains a buzzy topic for both investors and corporations.

A Brown Brother Harriman survey of investors found 56% intended to add AI and robotics-themed strategies to their portfolios this year.

Meanwhile, a Reuters analysis showed the term "AI" has been used nearly twice as frequently in this quarter's conference calls of S&P 500SPXcompanies as it was in the previous quarter.

Additionally, Rust said the push for onshoring is helping to shift inflationary pressures from the supply to the demand side.


"We've seen a significant shift over the last six months from a supply side issue to actual demand-side inflation... the supply issue is largely due to the onshoring of manufacturing and the desire for independence in parallel to deglobalization," he added.

(Lisa Mattackal)



Although the S&P 500 indexSPXended Thursday virtually flat for the week, shorter-term volatility has certainly picked up.

The benchmark index gave up as much as 2% through Wednesday, only to surge back as much as 2.2% on Thursday. That said, the SPX remains trapped in a range, and just shy of some major resistance.

Meanwhile, the Nasdaq CompositeIXIC, which also experienced some sharp swings this week, has seen one historical volatility measure on a daily basis collapse to a 20-month low, suggesting it is especially ripe for even greater swings, or indeed its next trend.

On Thursday, the Composite's daily Bollinger Band (BB) width ended at its tightest reading since August 25,2021.

Compressed band width does not in itself predict direction, but traders are on alert for what could end up being a surprisingly strong IXIC range breakout.

An IXIC thrust above this year's high at 12,270, as well as the upper daily BB, now around 12,285, will have potential to spark upside momentum.

Conversely, taking out the lower daily BB, which ended Thursday at 11,855, as well as Tuesday's low at 11,798, and the 50-day moving average, which closed Thursday at 11,788, will have the potential to trigger a sharp downside spill.

Perhaps not surprisingly, the S&P 500 tech sectorS5INFTis exhibiting similarly tight daily BB width as the Nasdaq Composite. Given that tech accounts for nearly 30% of S&P 500 market cap, it would appear that market fireworks are not far off.

(Terence Gabriel)



(Video) Coronavirus & Financial Market Impacts


Which market occurs when investors are pessimistic about the economy? ›

What Is a Bear Market? A bear market is when a market experiences prolonged price declines. It typically describes a condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment.

How long does the average bear market last? ›

Taking the past 12 bear markets into consideration, the average length of a bear market is about 14 months. How bad has the average bear been? The shallowest bear market loss took place in 1990, when the S&P 500 lost around 20%. The deepest by far happened during the financial crisis between 2007 and 2009.

Do individual investors outperform the market? ›

The average investor may not have a very good chance of beating the market. Regular investors may be able to achieve better risk-adjusted returns by focusing on losing less. Consider using low-cost platforms, creating a portfolio with a purpose, and beware of headline risk.

What causes loss of investor confidence? ›

bear market – a weak market where stock prices are falling and investor confidence is fading. It often happens when an economy is in recession and unemployment is high, with rising prices.

What occurs when investors are pessimistic about the economy and sell stocks? ›

A bear is an investor who believes that a particular security, or the broader market is headed downward and may attempt to profit from a decline in stock prices. Bears are typically pessimistic about the state of a given market or underlying economy.

What general market condition is characterized by investor pessimism? ›

Generally, a bear market is any condition where securities prices fall 20% or more compared to recent highs while accompanied by negative investor sentiments and widespread investor pessimism.

What is the longest bear market in US history? ›

As of now, the longest bear market occurred between 2000 and 2002 and lasted 929 calendar days. Image source: Getty Images.

How long does the average bear market last and decline? ›

The average length of a bear market is 292 days, or about 9.7 months. That's significantly shorter than the average length of a bull market, which is 992 days or 2.7 years. dot-com crash in March 2000 is technically the longest (a drop of 19.9% in 1990 nearly derailed that bull, but just missed the bear threshold).

Can you go long in a bear market? ›

Bear markets, when assets plummet 20% from recent highs, are among the scariest market events you'll encounter. But long-term investors can stay the course.

What percentage of individual investors beat the market? ›

And over a full 20-year period ending last December, fewer than 10 percent of active U.S. stock funds managed to beat their benchmarks. Still, every year, some actively managed funds do outperform the indexes. If you own one that does, you may not care about all the others that fail to do so.

What is the average return for individual investors? ›

5-year, 10-year, 20-year and 30-year S&P 500 returns
Period (start-of-year to end-of-2022)Average annual S&P 500 return
5 years (2018-2022)7.51%
10 years (2013-2022)10.41%
20 years (2003-2022)7.64%
30 years (1993-2022)7.52%
Feb 13, 2023

Why do individual investors underperform? ›

Fear and Greed Investing

This is one of the biggest reasons for individual investor underperformance. The study done by Fidelity Investments should highlight this. Investors in one of the most successful mutual funds lost money during a period of time where the fund made 29% annually.

Why do most people fail at investing? ›

Human emotion pulls investors in different directions and fear and greed are the two biggest hindrances to investment success because they cause investors to lose sight of their long term plans. The markets are 'noisy' with so much information being distributed through the media that people don't know who to trust.

What percentage of people fail at investing? ›

Over time, 80% end up losing money, 10% barely break even, and only 10% succeed. These can be tough statistics to swallow, but you also have to understand that many investors fail due to their own actions, or lack thereof.

What are the biggest mistakes investors make? ›

Chasing performance, fear of missing out, and focusing on the negatives are three common mistakes many investors may make. History shows investors who overreact to near-term market events typically end up doing worse than if they stuck to their long-term plan.

What is a pessimistic investor? ›

Qualities of Pessimistic Investors

They may abandon a successful investment at the expense of mitigating negative emotions even when the odds are in their favor. They are risk-averse and perfectionists: they need to know every step the investment will take before committing their dollar.

How does investor optimism and pessimism affect stock prices? ›

In the stock markets, two forces reign. The two forces are the bear market and the bull market. The bear market is characterized by pessimism and lowering prices, while optimism and increasing prices characterize the bull market.

Is investment expected to decrease when firms are pessimistic about the future? ›

pessimistic (What will happen to aggregate demand if firms become more pessimistic about the future?) If firms become more pessimistic about the future, investment will decline, resulting in a decline in aggregate demand.

What happens when firms are pessimistic? ›

Firms setting prices expect lower future productivity and hence higher marginal costs, a scenario that reduces their incentives to lower prices. In addition, firms' pessimism lowers the value of hiring workers, which increases unemployment due to a reduction in posting job vacancies.

What are the stock market players who have pessimistic expectations called as? ›

Bears are the polar opposite of bulls. They are pessimistic about the stock market and believe that prices are likely to fall. They are so sure that they even sell shares they don't own. When shares consistently decline, it is called a bear market.

What condition in the market exists when investors are overly optimistic and purchase stocks at more than their worth? ›

A bull market is a financial market characterized by rising prices and investor optimism. It is most commonly used to refer to the stock market, but can also refer to the bond, real estate, currency, and commodity markets.

When was the worst bear market in history? ›

The 1929 Great Depression

The 1929 bear market, caused by the Great Depression, is the largest in history. The September 1929 stock market crash was the first domino to fall which caused several banks to default triggering a chain reaction of collapsing institutions.

What was the worst bear market? ›

The most devastating take comes from looking at the Dow Jones Industrial Average. In January 1966, the Dow hit 983, a level it would not exceed until October 1982, when the Dow Jones closed at 991.

Which bear market took the longest to recover? ›

It took more than 31 years to recover from Japan's 1989 bear market.

Will 2023 be a bear market? ›

The bear [market] is almost over, and a new exciting bull market awaits in the second half of 2023,” he said, pointing to potential in technology stocks in particular.

Are we officially in a bear market? ›

You likely heard the term "bear market" recently, as the S&P 500 officially fell into one in June. Now, it's 2023, and the stock market is still struggling.

How long does it take to recover from a bear market? ›

Frank says the average bear market lasts about 9 months, but it takes much longer to recover what was lost. "If the next years are average, you're probably looking at 3 to 4 years out to get back," he says. "But that's not a guarantee, that's a long-term average."

Why not to sell in a bear market? ›

Many investors ask if they should sell stocks in a bear market. A smart investor will never sell during a bear market. Panic selling can ruin your portfolio and take you away from your financial goals. This is an opportunity to buy stocks.

What smart investors do in a bear market? ›

Invest for the long term

Smart investors understand that the stock market is cyclical and that bear markets are a natural part of the cycle. Therefore, they focus on the long-term outlook for their investments rather than short-term fluctuations in stock prices.

Should you hold cash in bear market? ›

Why is it important to hold cash before a bear market hits? If the market downturn caught you by surprise, making you wish you had more cash on hand to alleviate anxiety, now's a good time to prepare for the next one. “Having that liquidity during a bear market is the equivalent of insurance," Newman says.

Do financial advisors outperform the market? ›

Decades of data show that individual advisors, even the highest paid, do not consistently beat the market indexes. Plus their advice is expensive, which reduces your investable assets each year, resulting in lower long-term returns.

Do 90% of investors lose money? ›

Based on several brokers' studies, as many as 90% of traders are estimated to lose money in the markets. This can be an even higher failure rate if you look at day traders, forex traders, or options traders.

What is the number one rule investor? ›

Warren Buffett once said, “The first rule of an investment is don't lose [money]. And the second rule of an investment is don't forget the first rule. And that's all the rules there are.”

Is a 7% return on investment good? ›

A good return on investment is generally considered to be about 7% per year, based on the average historic return of the S&P 500 index, and adjusting for inflation. But of course what one investor considers a good return might not be ideal for someone else.

What is the best investors average return? ›

Most investors would view an average annual rate of return of 10% or more as a good ROI for long-term investments in the stock market. However, keep in mind that this is an average.

What is a realistic rate of return on investments? ›

According to conventional wisdom, an annual ROI of approximately 7% or greater is considered a good ROI for an investment in stocks. This is also about the average annual return of the S&P 500, accounting for inflation. Because this is an average, some years your return may be higher; some years they may be lower.

Do individual investors lose money? ›

According to the data, 69% to 84% of retail investors lose money.

Do most investors beat the S&P 500? ›

The phrase "beating the market" means earning an investment return that exceeds the performance of the Standard & Poor's 500 index. Commonly called the S&P 500, it's one of the most popular benchmarks of the overall U.S. stock market performance. Everybody tries to beat it, but few succeed.

What are the top 5 mistakes investors make? ›

Mallouk defines the five most common investment missteps—market timing, active trading, misunderstanding performance and financial information, letting yourself get in the way, and working with the wrong investment advisor—and includes detailed information on how to dodge the most common investing pitfalls.

Why 95% people fail in stock market? ›

1- No Strategy

The Number #1 reason why traders fail is that they have no strategy. A lot of traders don't want to acknowledge this but the fact is they have no idea what they are doing. Their idea of a strategy is some combination of technical indicators that they have heard or read somewhere.

Why do so many investors lose money? ›

Panic selling, hoarding funds, and trading rapidly during volatile markets - investors frequently make several errors that might harm them in the long run. Know how to recognise (and avoid!) the most prevalent negative behaviours.

What is the 4 percent rule investing? ›

What is the 4% rule for retirement? The 4% rule states that you should be able to comfortably live off of 4% of your money in investments in your first year of retirement, then slightly increase or decrease that amount to account for inflation each subsequent year.

What is the 40 percent investing rule? ›

SaaS Industry: Rule of 40 Guideline

In recent years, the 40% rule has gained widespread usage as a popularized measure of growth by SaaS investors. The Rule of 40 states that if a company's revenue growth rate were to be added to its profit margin, the total should exceed 40%.

Why many people don't invest? ›

In a recent survey by GoBankingRates, 55% of Americans are not investing because they think they don't have enough money to invest. They simply can't find room in their budget to invest. Others simply assume that only the rich can invest but forget the fact that most people BECOME rich by investing.

What scares investors? ›

Be dishonest or secretive. One of the fastest ways to shut down an investment deal is to be dishonest, Coplin says. The more open you are, the more your investor will trust you and your judgment. Don't try to over-inflate your connections or your success rate—just be honest.

How do you deal with difficult investors? ›

Learn some effective ways to get, maintain, and manage your investors.
  1. Be passionate. ...
  2. Have conversations. ...
  3. Provide options. ...
  4. Stop trying to sell. ...
  5. Keep majority stock. ...
  6. Offer easy access to documentation. ...
  7. Offer regular updates. ...
  8. Specify communication channels.
Jun 2, 2017

What is the biggest mistake entrepreneurs make? ›

Not preparing a proper business plan

A common mistake entrepreneurs make is the lack of a feasible marketable strategy. These entrepreneurs started a new firm without developing a successful business plan. This is unquestionably the wrong way to approach a new business.

Is bull market optimistic or pessimistic? ›

“Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.” So says the legendary investor, John Templeton.

What is a negative market? ›

Negative Market Effects are the result of changes in the local systems that allow or encourage particular groups to rapidly gain economic advantages. Organizations bringing in resources are often unaware of the local economic patterns, including the types of goods available and who provides them.

What market where investors feel bad about the economy and sell their stocks? ›

Bear markets are characterized by investors' pessimism and low confidence. During a bear market, investors often seem to ignore any good news and continue selling quickly, pushing prices even lower. Eventually, investors begin to find stocks attractively priced and start buying, officially ending the bear market.

What type of market is described by a receding economy? ›

A bear market exists in an economy that is receding and where most stocks are declining in value.

Are bull markets built on pessimism? ›

Franklin Templeton - Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria. - Sir John Templeton | Facebook.

What is an example of optimistic and pessimistic? ›

Examples of pessimistic and optimistic used in a sentence

His speech was generally optimistic and mostly highlighted good news. Daisy's pessimistic personality often led her to prepare for the worst. His pessimistic forecast for the industry predicted significant declines.

What is optimistic and pessimistic examples? ›

A person can be optimistic in regard to a specific area of life (e.g. expecting his/her marriage/relationship to succeed) but pessimistic regarding other aspects (e.g. expecting financial difficulties ahead).

What happens if your investment goes negative? ›

The value of the stock itself can't go negative. It can only become zero is the company goes bankrupt. The only case when you can see negative result is if you bought the stock and the price declined.

What is an example of negative investment? ›

Any investment that costs more to hold than it returns in payments can result in negative carry. A negative carry investment can be a securities position (such as bonds, stocks, futures, or forex positions), real estate (such as a rental property), or even a business.

What is negative target market? ›

The negative target market comprises those categories of investor for whom the product or financial instrument has been identified as incompatible for some reason connected with its nature or design.

Who is the unluckiest stock market investor of modern times? ›

Poor old Betty Badluck. She didn't give up. But every time she plucked up the nerve to invest in stocks, it turned out to be a terrible, terrible moment. So she bought at the end of March, 2000—which turned out to be the peak of the long bubble and the beginning of the longest bear market since the 1970s.

Why do most investors fail in stock market? ›

When investors invest in stocks rather than businesses: Investing in stocks based on the price trends and not bothering about the business is a big reason for failure at the stock market. Sometimes decisions based on the price of stocks might be deceptive and can cause loss to the investor.

Why most investors underperform the market? ›

Most investors, whether retail or professional, underperform the market over time. As a result, they are perpetually craving new investing methodologies and stock-picking ideas for a straightforward reason: Their chosen approaches to portfolio management are not producing alpha.

What will the market do in 2023? ›

"In the first half of 2023, the S&P 500 is expected to re-test the lows of 2022, but a pivot from the Federal Reserve could drive an asset recovery later in the year, pushing the S&P 500 to 4,200 by year-end," the investment bank said in a research note.

What sectors are expected to do well in 2023? ›

2023 US sector outlook
  • Energy. Information. technology. Health care. Utilities.
  • Real estate. Materials. Industrials. Communication. services.
  • Consumer. staples. Consumer. discretionary. Financials.

Is the stock market going to recession in 2023? ›

Geopolitical tensions, energy market imbalances, persistently high inflation and rising interest rates have many investors and economists concerned that a U.S. recession is inevitable in 2023. The risk of recession has been rising as the Federal Reserve has raised interest rates in its ongoing battle against inflation.


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