AAII Bearish Sentiment Hit a 95th-Percentile Extreme — With the S&P 500 Near Record Highs

Individual investors are telling pollsters they are scared. The stock market is not behaving like it. In the week ending September 30, 2026, the American Association of Individual Investors' (AAII) weekly Sentiment Survey found 46.5% of respondents bearish on stocks over the next six months, versus just 34.6% bullish — a bull-bear spread of -11.9 percentage points, according to AAII's own published data. That reading landed within days of the S&P 500 closing at 7,722.72 on October 2, 2026 (Federal Reserve Economic Data, sourced from S&P Dow Jones Indices), up roughly 13% year-to-date and about 1% below its 2026 closing high after notching at least 27 record closes during the year. Pessimism at the survey level and record-chasing at the index level do not usually show up in the same week. This piece looks at how often that combination has happened since AAII's survey began in 1987, and what the S&P 500 did afterward each time.

Photo: Acediscovery, via Wikimedia Commons (original file page), licensed under CC BY 4.0. File photo of the Wall Street street sign, used here as a generic illustration and not tied to any specific trading session.

Every past extreme, lined up in one table

AAII has published its own historical breakdown of what followed when its weekly bearish reading crossed statistically extreme levels, in a 2004 AAII Journal study covering July 1987 through September 2004. Two thresholds stand out: bearish sentiment above roughly 46.3% (two standard deviations above that study's 27.9% mean) occurred in 40 weekly readings during the study period, and the S&P 500 gained an average of 18.0% over the following 12 months after those readings. Bearish sentiment above roughly 55.5% (about three standard deviations above the mean) occurred in just 8 weekly readings, after which the S&P 500 gained an average of 23.7% over the following year. For comparison, AAII's 2013 follow-up study found the S&P 500's average 12-month gain across all weeks from July 1987 to May 2013 was 8.4%, while in the 2004 study the average 12-month return following an extreme bullish reading (above 61.4%) was a decline of 5.5%.

Condition (weekly AAII reading)	Approx. occurrences since 1987	Avg. S&P 500 return, next 12 months
Any week (baseline, Jul 1987–May 2013, AAII 2013 study)	n/a (full sample)	+8.4%
Bearish > ~46.3% (≈2 SD above mean)	40 weeks	+18.0%
Bearish > ~55.5% (≈3 SD above mean)	8 weeks	+23.7%
Bullish > ~61.4% (≈2 SD above mean)	comparable rarity to bearish extreme	−5.5%
Current: week ending Sep 30, 2026	46.5% bearish (≈95th pctile, illustrative)	Not yet known

Sources: AAII Sentiment Survey (aaii.com), including AAII's own published analysis of its 1987–present weekly history; S&P 500 levels from FRED (Federal Reserve Bank of St. Louis), originally sourced from S&P Dow Jones Indices LLC. Occurrence counts and average returns come from AAII's 2004 study (July 1987–September 2004); AAII's later 2013 study, using different thresholds, found weaker and more mixed results, so these figures should not be read as current; figures are nominal price-index returns and do not include dividends, fees, or taxes.

This week's reading beside its own 39-year average

AAII has run its weekly sentiment poll of its own members continuously since July 1987, making it one of the longer-running, publicly available gauges of US retail-investor expectations. As of the week ending September 30, 2026, AAII reported bullish sentiment at 34.6%, neutral at 18.9%, and bearish at 46.5%, against long-run historical averages (per AAII) of roughly 37.5% bullish, 31.0% neutral, and 31.5% bearish. The bearish reading sits well above its own historical norm.

AAII's own reading for the prior week (ending September 23, 2026) was even more bearish, at 48.1% bearish and 32.7% bullish, so sentiment stayed in rare territory across consecutive readings, not just one isolated week.

To see how unusual the current reading is in simple statistical terms, treat AAII's long-run bearish average (about 31.5%) and a typical weekly standard deviation (roughly 9.2 percentage points, implied by the 9.2-point gap between AAII's published two- and three-standard-deviation thresholds below) as a rough normal approximation — an illustrative simplification, not an official AAII statistic. A bearish reading of 46.5% is then about (46.5 − 31.5) / 9.2 ≈ 1.6 standard deviations above the long-run mean, which in a normal distribution corresponds to roughly the 95th percentile of all weekly readings. This is a back-of-envelope check, not a precise percentile; AAII's actual weekly distribution is not perfectly normal, and the calculation is offered only to size the move in plain terms.

AAII next to the other sentiment gauges

AAII's weekly poll is not the only way to measure investor mood, and it is worth being clear about what it does and does not capture. The CBOE equity put/call ratio measures actual options positioning rather than stated opinion, and can move on a single day's hedging flow; the CNN Business Fear & Greed Index blends several market-based inputs (breadth, momentum, volatility, junk-bond demand) rather than surveying people directly. AAII's survey is narrower and slower-moving by design: it asks a consistent panel of self-identified individual investors the same question — bullish, neutral, or bearish on stocks over the next six months — every week, which is precisely what makes a multi-decade, apples-to-apples comparison like the one above possible. The trade-off is that it reflects the opinions of AAII's membership, not options-market positioning or the behavior of institutional money, so it is best read as one data point on individual-investor psychology rather than a complete picture of market sentiment.

$10,000 run through each row of the table

To make the 18.0% average 12-month figure concrete, consider a purely hypothetical, illustrative scenario with no connection to any real account: an investor places $10,000 into a fund tracking the S&P 500 price index at a moment when the weekly AAII bearish reading first crosses the roughly 46.3% threshold, and holds for exactly 12 months, with no additional contributions or withdrawals and dividends ignored for simplicity. If that single position matched the 40-observation historical average of +18.0%, it would be worth approximately $11,800 a year later. If it matched the rarer 8-observation, +23.7% average associated with the more extreme 55.5% threshold, it would be worth approximately $12,370. These are illustrations of what the historical averages imply in dollar terms, not a projection for the current reading, a guarantee, or advice to invest at any particular level.

Four columns the table does not have

Extreme bearishness in the AAII survey has historically clustered around falling or stagnant markets. AAII's all-time record bearish reading, 70.3%, came on March 5, 2009 — four days before the S&P 500 bottomed out at the end of the financial-crisis bear market. The all-time record bullish reading, 75.0%, came on January 6, 2000, within weeks of the dot-com peak. Both are examples of sentiment running furthest in one direction near a turning point, but both also occurred while the index was moving in the same direction as sentiment implied — falling sharply into the 2009 low, or near a market top in 2000. A reading this bearish while the index sits close to a record high, rather than in a drawdown, is the less common pattern.

Several limitations temper how much weight this pattern should carry. First, the 40 and 8 "occurrences" behind AAII's own figures are weekly snapshots, not independent events — sentiment extremes tend to persist for several consecutive weeks once reached, so a single multi-month stretch of pessimism can count as many "observations" clustered together, inflating the apparent sample size relative to the number of genuinely distinct market episodes. Second, extreme bearish sentiment has sometimes preceded further declines rather than gains — in the 2008–2009 bear market, AAII bearish readings spiked well above the long-run mean on multiple occasions before the market kept falling for additional months, meaning the signal was directionally early rather than wrong, but painful to hold through in real time. Third, the AAII panel is a self-selected group of AAII members who respond voluntarily each week; it is a long-running and widely cited proxy for individual-investor mood, not a random sample of the entire US retail investor population, and its membership skews toward more experienced, DIY-oriented investors rather than the broader public. Fourth, correlation between a sentiment extreme and a subsequent 12-month average return is not the same as a reliable forecast for any single future year — the average masks a wide range of outcomes, and macro conditions (interest-rate policy, earnings growth, geopolitical shocks) that did not exist in earlier instances could behave differently this time. None of this invalidates the pattern as a piece of market history; it simply means the historical averages describe a tendency across many years, not a prediction for the next twelve months.

The useful takeaway from the data is narrower than "bearish investors are usually wrong." It is that a specific, measurable, and unusual divergence exists right now: a survey of individual investors is more pessimistic than it has been in roughly 95% of its 39-year history, at the same time the index those investors are being asked about sits within a few percent of its own record. Historically, extreme sentiment readings in either direction have more often resolved in the direction opposite the crowd's stated expectation over the following year, and the magnitude of that historical tendency has scaled with how extreme the reading was. That is a statistical regularity worth knowing, not a trading signal to act on mechanically — it says nothing about timing, about what happens over the next week or month, or about any individual's specific financial situation, time horizon, or risk tolerance.

Tip: Sentiment extremes are most useful when you compare them with what you did last time. An investment journal lets you record your reaction to readings like this one, and a stock market investing book covers the research on contrarian signals. (These are Amazon Associate links — we may earn a small commission on qualifying purchases.)

Sources

• American Association of Individual Investors — AAII Sentiment Survey, weekly results (week ending Sept. 30, 2026)
• AAII Journal — Investor Sentiment as a Contrarian Indicator (study period July 1987–Sept. 2004)
• AAII Journal — Is the AAII Sentiment Survey a Contrarian Indicator? (June 2013)
• Federal Reserve Bank of St. Louis (FRED) — S&P 500, SP500 daily close (Oct. 2, 2026)
• S&P Dow Jones Indices — S&P 500 index overview

This article is for general investment education and informational purposes only. It does not constitute individualized financial, investment, tax, or legal advice, and nothing in it should be read as a recommendation to buy or sell any specific security. Historical patterns, including the sentiment-return relationships described above, are not a guarantee of future results. Readers should consult a licensed financial professional about their own circumstances before making investment decisions.