Investor confidence continued to soften this week, with bullish sentiment among individual investors slipping to 39.3%, down from 41.4% the previous week, according to the latest American Association of Individual Investors (AAII) Sentiment Survey for the period ending July 16. The decline marks a continuation of a downward trend in optimism even as major indices post mixed performance. 

Meanwhile, bearish sentiment climbed sharply, rising to 39% from 35.6% in the prior reading — nearly matching bullish sentiment and reflecting rising caution among retail investors amid macroeconomic uncertainty and volatile equity market movements. 

The share of respondents expressing neutral sentiment — those expecting stock prices to remain largely unchanged over the next six months — also fell to 21.8%, down from 23% last week, suggesting investors are increasingly forming stronger directional opinions on the market outlook. 

This shift in sentiment comes as the S&P 500 declined 0.3% and the Dow Jones Industrial Average slipped 0.9% over the past week, while the Nasdaq Composite posted a modest gain of 0.5%, buoyed by strength in large-cap tech and continued AI momentum. 

The AAII sentiment survey, which has been conducted weekly since 1987, is widely followed as a contrarian indicator. Historically, elevated levels of bullishness can precede market pullbacks, while high bearishness is often viewed as a potential buying signal. 

With bullish and bearish sentiment now in near parity and neutral views declining, the data suggests retail investors are bracing for increased market volatility in the months ahead.