Sentiment Sours As Stocks Pull Back

This week’s release of the American Association of Individual Investors survey resulted in 30.4% of respondents reporting bullish sentiment, tied for the lowest level of bullishness this year (tied with the March 19th release). Not only that, but the percentage of respondents reporting bearish sentiment ticked up to 47.7%, the highest since April 2nd.

Through yesterday’s close, the S&P 500 has fallen 4.5% from its June 2nd all-time high. Consequently, bears are coming out of hibernation as the tech-led rally has lost some of its steam, and geopolitical uncertainty continues to rattle markets.

Bullish sentiment fell by 5.9 percentage points this week, a decline larger than roughly 80% of all weekly changes since 1987 when the survey began.

While the decline in bullish sentiment was notable, the deterioration was very apparent in the pop of bearishness. Bearish sentiment jumped by 10.7 percentage points this week, an increase larger than roughly 93% of all weekly changes since 1987 and 96% of the changes recorded so far in 2026.

While the broader market has seen a pullback from its peak over the last week, and AAII bullish sentiment has dropped to its lowest level of the year, forward performance of the S&P 500 has been less grim in similar environments. Since 1987, AAII bullish readings between 30% and 35% have occurred roughly 17% of the time. Following those readings, the S&P 500 has posted positive average returns over every measured horizon, including gains of 2.9% over the next three months, 5.3% over the next six months, and 10.7% over the following year. In fact, the market tends to sour most when bulls are feeling their best, though the sample size for readings above 65% is slim. In contrast, some of the strongest forward returns, on average, occur when individual investors are least optimistic.