U.S. stocks approach record highs, yet retail investors grow increasingly pessimistic! Survey shows bearish sentiment rises to 53.3%, with a notable increase in cash allocations.

Title context: U.S. stocks approach record highs, yet retail investors grow increasingly pessimistic! Survey shows bearish sentiment rises to 53.3%, with a notable increase in cash allocations. Text: The latest weekly survey released by the American Association of Individual Investors (AAII) on Friday shows that, against the backdrop of oil prices remaining elevated and the Federal Reserve raising interest rates for the first time since 2023, investor bearish sentiment has risen to its strongest level since 2025. Notably, in sharp contrast to the continued cooling of investor sentiment, the S&P 500 is currently only about 2% away from its historical high. The latest survey shows that 53.3% of surveyed investors expect the stock market to trend weaker in the future, with bearish respondents accounting for more than half; the proportion of bullish investors fell to 28.8%, the lowest level in a year. Based on this, the bull-bear sentiment spread in the AAII survey widened further, with the bearish proportion exceeding the bullish proportion by 24.5 percentage points, the most pessimistic level since May 2025. AAII Vice President Charles Rotblut said this level is "unusually depressed," not only marking the lowest level since May 2025, but also remaining below the historical average of 6.5% for the ninth consecutive week. The S&P 500 is only about 2% from its historical high, yet investor sentiment has fallen to a more than one-year low This notable weakening in investor sentiment comes as U.S. financial markets have experienced a period of volatility since late summer. On the one hand, oil prices have remained elevated, intensifying market concerns about inflationary pressure; on the other hand, the Federal Reserve raised interest rates this week for the first time since 2023, further strengthening investors' expectations that a high-interest-rate environment may persist. Under the influence of multiple factors, U.S. individual investors have clearly become more cautious. However, from the perspective of the stock market itself, there is a clear divergence between market performance and investor sentiment. After a period of volatility since late summer, the S&P 500 is still only about 2% away from its historical high. In other words, U.S. stocks have not yet seen a major pullback, but the bearish proportion in the AAII survey has already exceeded 50%, and the bull-bear sentiment spread has fallen to its lowest level since May 2025. This combination of "the index being near a historical high while investor sentiment is highly pessimistic" has also brought the latest AAII data increased market attention. More than half of investors increased cash allocations, with nearly 20% saying it is "far above normal levels" In addition to sentiment indicators, investors' actual asset allocation also shows a defensive tilt. The latest AAII survey shows that more than half of respondents currently hold a higher-than-normal proportion of cash. Among them, 19.1% of investors said their cash allocation is already "far above normal levels." An increase in cash positions usually means that investors are reducing exposure to risk assets, or temporarily holding funds while waiting for a more suitable entry opportunity. Combined with the rise in the bearish proportion to 53.3%, this survey shows that individual investors have not only become more cautious in sentiment, but have also increased their defensiveness at the asset allocation level. However, the AAII investor sentiment survey is not merely an indicator of the degree of market optimism or pessimism; some traders also use it as a contrarian indicator. Generally speaking, excessively high optimism may mean that investors are becoming complacent, while extremely low sentiment readings mean that market panic and caution have become relatively concentrated. Therefore, when bearish sentiment reaches an unusually high level, some investors pay attention to whether the market has already priced in a considerable portion of negative expectations. In this survey, the bearish proportion exceeded the bullish proportion by 24.5 percentage points, far worse than the historical average in which the bullish proportion led by 6.5 percentage points, while the S&P 500 is still only about 2% away from its historical high, highlighting the clear divergence between stock market performance and investor sentiment.