Investors' pessimism rises as inflation, Fed cut takes center stage
Investors' pessimism about the short-term outlook for the stock market makes a comeback this week, as inflation pressure and Fed rate cut continue to take the limelight.
A total of 28.3% of respondents of the American Association of Individual Investors, or AAII, Sentiment Survey, said they think the market will trend down in the next six months, compared to 22.5% and 25.7%, respectively, in the last two weeks.
The figure is above the historic bearish high of 31%.
The percentage of those surveyed who felt optimistic about the market came in at 44.5% versus 44.4%, a week ago.
Neutral sentiments also fell this week, with 27.2% of the investors polled by AAII seeing no change in the market direction. The figure was 33.1% the week before.
Even though the U.S. Federal Reserve acknowledged that there had been "modest further progress" towards their 2% inflation target, investors are still worried about rising prices, geopolitical tensions and the overall outlook of the market.
The Federal Reserve had indicated policymakers expect to make one rate cut of 25 basis points before the end of 2024.
“Consumer sentiment is at a seven-month low, but spending suggests otherwise and should limit any market drawdown this summer, which is needed to refresh the uptrend,” pointed out Seeking Alpha analyst Lawrence Fuller.
Nvidia was once again in focus after the AI darling saw some pullback. The stock, which went up over 150% so far this year and briefly became the world's largest publicly listed firm, has lost over 3% in the past few days.
Looking ahead, Wall Street was left disappointed after Micron Technology’s (MU) guidance, which was in-line with estimates, overshadowed a stronger-than-expected third-quarter. The stock fell over 6% in extended trading on Wednesday.
The S&P 500 Index (SP500) rose 0.08% in the last one week, while Dow Jones Industrial Average Index (DJI) fell marginally. NASDAQ Composite Index (COMP:IND) gained 0.5% and NASDAQ 100-Index (NDX) fell 0.01%.