Bullish sentiment surges among retail investors post Fed cut

Individual investors have shown a significant boost in optimism regarding the stock market following the Federal Reserve's recent rate cut, according to the latest AAII Sentiment Survey.

The survey reveals a notable increase in bullish sentiment, with expectations for rising stock prices over the next six months climbing to 50.8%, up by 11.0 percentage points.

The rise in optimism is particularly striking as it is "unusually high" and above its historical average of 37.5% for the 45th time in 46 weeks, according to the AAII.

Conversely, neutral sentiment—expectations that stock prices will remain largely unchanged—dropped 6.5 percentage points to 22.8%.

The firm said this marks the 11th consecutive week that neutral sentiment has fallen below its historical average of 31.5%.

Meanwhile, they reveal that bearish sentiment, which reflects expectations of falling stock prices, decreased 4.5 percentage points to 26.4%, falling below the historical average of 31.0% for the fifth time in six weeks.

The bull-bear spread, which measures the difference between bullish and bearish sentiment, is said to have surged to 24.4%, a 15.6 percentage point increase.

AAII says this figure is notably above the historical average of 6.5% for the 19th time in 20 weeks, highlighting a strong divergence in investor outlooks.

The AAII said that when asked about the primary factors influencing their outlook for stocks, 34.9% of members cited the economy and inflation as the most significant influences.

Monetary policy and interest rates followed closely, with 28.4% of respondents indicating their importance. Valuations and corporate earnings were less prominent factors, garnering 14.8% and 13.3% of responses, respectively.

Overall, the survey underscores a pronounced shift in sentiment among individual investors, driven largely by the recent changes in monetary policy and economic expectations.

Source: Investing.com