Investor sentiment falls to lowest point since 2025, survey shows

Individual investors haven’t been this gloomy in over a year. The latest AAII Sentiment Survey, released on September 18, 2026, shows bullish sentiment cratering to 28.8%, a drop of 9.2 percentage points in a single week and the lowest reading in roughly 16 months.

On the other side of the ledger, bears are having their moment. Bearish sentiment surged to 53.3%, up 14 points week-over-week, its highest level since May 2025. Neutral sentiment dropped to 17.9%, down 4.8 points.

What’s driving the fear

Two forces are converging to sour the mood: elevated oil prices fueled by geopolitical tensions tied to the Iran conflict, and the Federal Reserve’s decision to raise interest rates by 25 basis points. That rate hike marks the Fed’s first tightening action since 2023, a reversal that caught many market participants off guard after months of expecting the central bank to hold steady or even cut.

Global equity funds experienced net outflows of $23.21 billion during the survey period, the largest exodus in nine months. US equity funds were hit even harder, posting $31.44 billion in outflows.

How far sentiment has drifted from normal

The AAII Sentiment Survey has been running continuously since 1987. The historical averages paint a picture of what “normal” looks like: 37.5% bullish, 31.0% neutral, and 31.5% bearish.

Current readings are nowhere near those averages. Bullish sentiment at 28.8% sits nearly nine points below its long-run average. Bearish sentiment at 53.3% is more than 20 points above its historical norm. Neutral sentiment at 17.9% is well below its typical level of 31.0%.

A 9.2-point drop in bullish sentiment in a single week is not gradual repositioning. The last time bearish sentiment was this elevated, in May 2025, markets eventually recovered over the following months.

The contrarian signal, and why it might not apply this time

Extreme pessimism in sentiment surveys has historically served as a contrarian indicator. But contrarian signals are most reliable when sentiment diverges from fundamentals. When pessimism is driven by genuine deteriorating conditions, like rising borrowing costs and commodity-driven inflation, the bearish consensus can be correct for longer than contrarians expect.

The $23.21 billion in global equity fund outflows suggests this isn’t just a survey-respondent mood swing. When fund flows confirm what sentiment surveys are saying, the signal tends to be more durable than when the two diverge.

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