Bearish Mom-and-Pop Investors Signal Stocks Could Keep Soaring

The U.S. stock market is up 13% in 2025.

If the year ended today, that would be slightly higher than the long-term annual average. But 2025 has felt anything but "typical"...

We've seen all kinds of threats to the economy and markets... leading to dramatic price swings along the way. Some were more dramatic than others, depending on the headlines that day.

Investor attitudes have been up and down, too. Folks were fearful in April... then quickly turned greedy as the economic outlook improved.

Today, stocks are hitting new highs. So you'd expect investors to be giddy. But that's not the case...

Instead, mom-and-pop investors have turned bearish again. But as you'll see, the return of fear to the market is a surprisingly good sign for future returns.

Let me explain...

The Wall of Worry Is a Good Sign for This Bull Market

As the Wall Street saying goes, "Bull markets climb a Wall of Worry."

It doesn't matter how well things are going... Investors are always looking for a reason to sell.

As humans, we're wired to look for the next potential danger...

Bull markets survive in spite of that. Investors continue to expect the worst – all the way to the top.

Today, the Wall of Worry is back. We can see it through one of our favorite indicators, the American Association of Individual Investors ("AAII") Investor Sentiment Survey.

This weekly survey asks regular mom-and-pop investors what they expect going forward. Specifically, it asks whether they're bullish, bearish, or neutral on stocks over the next six months.

Today, we're focusing on times when more folks are bearish than bullish. To see that, we simply take the bullish reading and subtract the bearish reading. If that figure is negative, the bears are winning.

For each of the past seven weeks, we've seen more bears than bulls...

This might not seem so extreme at a glance. After all, the most bearish level we've seen in recent weeks is nothing compared with the lows from earlier this year... or the depths of the 2022 bear market.

Despite that, it's significant to see more bears than bulls for seven straight weeks. History shows it can make a difference to your returns...

We've seen this 27 other times since the data begins in 1987. That's about once every year and a half.

And these setups were good opportunities to buy...

Since 1987, stocks have returned 8.9% a year. So if the year ended today, 2025 would outperform that typical annual return. But of course, you can do much better than "typical" in certain setups.

Today is one of those times. Similar instances led to 4.1% gains in three months, 7.6% gains in six months, and 13.4% gains over a year.

In all cases, that's impressive outperformance. And stocks were higher a year later 88% of the time.

This is an important lesson about how bull markets work. Our psychology makes us always look for the next problem... But booms carry on anyway.

That's why I recommend you stick with the trend when making investment decisions...

Right now, the trend is up. And according to history, we can expect the recent stock rally to continue.

Good investing,

Brett Eversole