Investor Pessimism Jumps to Levels Not Seen in Nearly 13 Years
Investor Pessimism Jumps to Levels Not Seen in Nearly 13 Years

By Tom Ozimek

Investors are becoming increasingly bearish on stocks as persistently high inflation has compelled the Federal Reserve to hike rates aggressively, with Bank of America analysts and the American Association of Individual Investors (AAII) both saying that investor pessimism has hit levels not seen since around the time of the financial crisis of 2008–09.

The latest sentiment survey from AAII shows that the percentage of individual investors describing their six-month outlook for stocks as “bearish” rose sharply by 14.9 percentage points, to 60.9 percent. The last time the AAII investor pessimism gauge was higher was in March 2009, when it hit 70.3 percent.

Bank of America analysts said in a recent research note that investors are flocking to cash as they shun risk assets, with investor sentiment “unquestionably” the worst since the financial crisis.

Bullish sentiment, meanwhile, remained below its historical average of 38 percent for the forty-fourth consecutive week, AAII said. The organization said its bullish sentiment measure fell by 8.4 percentage points, to 17.7 percent, which is among the 20 lowest readings in the history of the survey.

“Unusually high bearish sentiment readings historically have also been followed by above-average and above-median six-month returns in the S&P 500,” AAII said, which suggests a rally in U.S. stock could be in the works.

Room to ‘Catch Down’

Some market analysts expect more downside for U.S. stocks as economic indicators flash warning signs and as the Fed is on a rate-hiking cycle.

“With tightening monetary policy, an ongoing global growth slowdown, and relatively elevated valuations, the path of least resistance continues to be lower for the equity market,” Nick Reece, vice president of macro research and investment strategy at Merk Investments, told The Epoch Times in an emailed statement.

“Rising nominal and real interest rates continue to pressure valuation multiples, particularly for large-cap growth stocks. The market looks like it has room to ‘catch down’ to where real rates are currently, and there is a strong chance real rates continue to rise based on the Fed’s framework,” Reece added.

Federal Reserve Chair Jerome Powell told reporters at a press conference on Sept. 21 that inflation was “running too high” and warned that rates are heading higher and poised to stay at a restrictive level for “some time.”

“The historical record cautions strongly against prematurely loosening policy,” Powell told reporters, adding that central bank policymakers see the federal funds rate peaking at 4.6 percent by the end of 2023, before declining to 2.9 percent by the end of 2025.

Recession Drums Beat Louder

Meanwhile, a key economic gauge from the Conference Board dropped for the sixth month in a row in August, with a “major driver” being the Fed’s aggressive rate hikes.

The Leading Economic Index (LEI) for the United States, which is a forward-looking gauge made up of 10 individual indicators, fell by 0.3 percent in August, the Conference Board said on Sept. 22.

“The U.S. LEI declined for a sixth consecutive month, potentially signaling a recession,” Ataman Ozyildirim, senior director for economics at the Conference Board, said in a statement.

While the U.S. economy met the common rule-of-thumb definition for a recession when gross domestic product (GDP) printed negative for two quarters in a row earlier this year, recessions are formally called by a panel of economists at the National Bureau of Economic Research (NBER).

NBER economists use a broader definition than the two-quarter rule, relying on a wide range of indicators, including the labor market, which has remained on relatively solid footing.

There are signs, however, that the tight labor market is starting to loosen. The most recent U.S. government jobs report showed moderate wage growth and a rise in the unemployment rate, to 3.7 percent.

Affiliate News Feeds

  • Reuters
  • Washington Examiner
  • The Federalist
  • The Epoch Times
  • The Guardian
  • The Gateway Pundit
  • Judicial Watch

By Hans Mahncke News Analysis Late on Dec. 2, Elon Musk started the process of releasing thousands of internal Twitter emails. Musk, whose purchase of Twitter was completed on Oct. 28, had previously announced… [...]

By Naveen Athrappully France is banning short-haul domestic flights when there is a regular and frequent train option that takes less than two and a half hours, after a 2021 climate law, No… [...]

By Katabella Roberts House Minority Leader Kevin McCarthy (R-Calif.) vowed on Sunday that the fiscal 2023 National Defense Authorization Act (NDAA) will not move forward unless the military’s COVID-19 vaccine mandate ends. Speaking on Fox Business Network’s “Sunday… [...]

California lawmakers are once again poised to introduce legislation to tax Big Oil despite public backlash over a similar move earlier this year. [...]

The Supreme Court heard oral arguments Monday in a case about whether a custom webpage designer who disagrees with LGBT marriage can refuse to create a website for a same-sex… [...]

President Joe Biden is considering the idea of removing the COVID-19 vaccination mandate for U.S. service members, though he backs Defense Secretary Lloyd Austin’s continued support for the measure. [...]

Even corrupt corporate media are willing to acknowledge the risk of nuclear war is 'now a daily issue for the Biden administration.' [...]

A legal rep for the Loudoun County School Board engaged in witness tampering during an investigation into an alleged sexual assault. [...]

The attack on Lorie Smith is both authoritarian and unconstitutional. [...]

A recently discovered filing in a court case relating to Big Tech censorship revealed that the office of Arizona Secretary of State Katie Hobbs coordinated with Twitter to censor election… [...]

The Biden administration has claims it drained the heavily depleted U.S. Strategic Petroleum Reserve (SPR) in order to save the “global economy.” The White House’s International Energy Affairs adviser, Amos… [...]

To some, it’s an arcane discussion among constitutional scholars that reads like cement. To others, it’s a brazen grab for “runaway legislative power” by state lawmakers who say the U.S.… [...]

Labour-endorsed study finds initiative would save families thousands of pounds, cut benefits spending and raise tax revenuesFree universal preschool childcare and more funding for after-school clubs could increase government revenues… [...]

Charity boss talks of very difficult time for her charity Sistah Space since encounter with Susan HusseyA black British charity leader who was asked where she “really came from” by… [...]

PM caves in as up to 100 Tory MPs threaten to rebel, leading Labour to accuse him of putting party before countryRishi Sunak is to drop compulsory housebuilding targets to… [...]

Orange County, California – A Huntington Beach school principal committed suicide at Disneyland on Saturday. Christopher Christensen, 51, jumped off the Mickey & Friends parking structure on Saturday. Christensen said… [...]

Joe Biden’s Assistant Secretary of Health’s leading mission from day one has been pushing the normalization of transgenderism in our nation’s children.  This time, however, Levine wants America’s physicians to… [...]

Senator-elect Eric Schmitt, and current Missouri Attorney General, joined Sean Hannity on Monday night to discuss the federal government’s collusion with Democrat politicians to silence their conservative opposition. Currently, Missouri… [...]

Top Headlines of the Week Press Releases Judicial Watch: Secret Service Has Repeatedly Changed Story on Existence of Hunter Biden Gun Records Judicial Watch announced recently that the United States… [...]

From The European Conservative: In recent days, we have seen news reports proclaiming the Ukrainian victory along the western bank of the Dnipro River in the city of Kherson. These… [...]

Secret Service Repeatedly Changes Its Story on Hunter Biden Gun Records What is the Secret Service Hiding about Biden Raid on Trump’s Home? Judicial Watch Sues to Find Out! Judicial… [...]

USNN2020

USNN World News (USNN) USNN World News Corporation is a media company consisting of a series of sites specializing in the collection, publication and distribution of public opinion information, local,...