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Jonathan Levin

So You Say You’re Bearish on Stocks, But Are You Really?

A survey of investor sentiment is near levels of pessimism last seen before the bull run. Valuations don’t back that up.

Sometimes you beat the bear; this time you might not.

Sometimes you beat the bear; this time you might not.

Photographer: Peter Juelich/Bloomberg

By some measures, US stock market sentiment is just about as negative as it was in March 2009, right before the S&P 500 Index began its 10-year bull market that helped investors quintuple their money. As tempting as it is to take the other side of that doom-and-gloom trade, investors should consider fighting their contrarian instincts. This is a much different market, and the negative sentiment may well be justified this time.

The American Association of Individual Investors’ weekly survey shows that bearish views on the market trajectory for the next six months far outnumber the bullish ones, with the ratio now at about 3.4-to-1, a level of pessimism more or less unparalleled since the wake of the financial crisis. That’s been the case more or less since April, with a few temporary mood swings for the better along the way.