Warren Buffett notoriously said to be greedy when others are fearful and fearful when others are greedy. These days, people are certainly fearful.
According to a survey from the American Association of Individual Investors, 60.9% of respondents are currently bearish. This is an uptick from a previous survey that showed 46% of individual investors were bearish.
The drastic drop-off in sentiment likely stems from a recent Consumer Price Index (CPI) report indicating that inflation has increased. The notion that inflation had peaked at some point in June/August is now moot.
Also, a recent profit warning from FedEx (NYSE:FDX) underscores weakness in global shipping demand. The counterpoint is that consumer spending has shifted since the height of the Covid-19 lockdowns, and people are spending more money on travel as opposed to goods.
Hotter-than-expected inflation combined with warnings from major companies like FedEx reinforces the negative sentiment. The Fed will have no choice other than to remain hawkish until inflation cools.
A high percentage of individual investors will remain bearish and, at some point, the market will find a bottom, which will coincide with the “highest point of fear.” Whether we are there right now, remains uncertain.