A Fresh Look for Main Street Wealth Advisors
Before we turn to this week’s market commentary, we’re excited to share something new at Main Street Wealth Advisors: our newly redesigned website is now live!
Our new website was created to better reflect who we are, how we serve our clients, and the values that have guided Main Street Wealth Advisors from the beginning. The updated design offers a fresh, modern look while making it easier to learn about our Team, the services we provide, our approach to wealth management and financial planning, and the organizations and communities we are proud to support.
While our website may have a new look, our commitment to our clients remains exactly the same — providing thoughtful, personalized guidance and helping the individuals and families we serve make confident financial decisions through every stage of life.
We invite you to take a look around and explore the new site:
Visit the newly redesigned Main Street Wealth Advisors website!
We hope you enjoy the new experience, and as always, thank you for the trust and confidence you place in our Team.
With that exciting update from Main Street, we’ll turn our attention to the markets and the developments shaping the investment landscape as we begin a new week.
Investor Sentiment Remains Surprisingly Cautious
People seem to have strong opinions about almost everything these days — from politics to pineapple on pizza — and the stock market is certainly no exception. Questions about artificial intelligence, high-profile private companies such as SpaceX, interest rates, the economy, and whether the market has moved too far too fast have become increasingly common.
The data suggest this heightened level of opinion isn’t just anecdotal. Investors have become increasingly reluctant to simply sit on the sidelines.
Fewer Investors Are Neutral
One way to measure investor sentiment is through the American Association of Individual Investors (AAII) Sentiment Survey, which asks investors whether they expect stocks to rise, fall, or remain relatively unchanged over the next six months.
Historically, about 31% of respondents have described themselves as neutral. Over the past two years, however, neutrality has become surprisingly uncommon. In only four of the past 104 weeks has the average neutral reading reached its historical norm of 31% or higher.
What makes this especially interesting is that market conditions haven't been particularly unusual. The Cboe Volatility Index (VIX) has averaged approximately 18.5 during this period, below its longer-term average. Meanwhile, the S&P 500 has remained an average of just 2.2% below its all-time high, compared with an average of approximately 10.4% since 1987.
Despite relatively favorable market conditions, investors have continued to express strong opinions — and recently, those opinions have tilted toward pessimism.
Source: Nasdaq Dorsey Wright
Bears Currently Outnumber Bulls
Another useful measure is the AAII Bull-Bear Spread, calculated by subtracting the percentage of bearish investors from the percentage who are bullish. A positive number means bulls outnumber bears, while a negative number indicates the opposite.
The current reading of approximately -11% indicates that bearish investors outnumber bullish investors, although sentiment has not reached historically extreme levels.
Interestingly, pessimistic investor sentiment hasn't necessarily been a negative signal for stocks. Historically, investors have not been particularly successful at predicting the market's short-term direction. When the AAII Bull-Bear Spread has fallen between -20% and -10%, subsequent S&P 500 returns have historically been stronger than average across periods ranging from one week to two years.
In other words, widespread caution can sometimes be more encouraging than concerning.
Source: Nasdaq Dorsey Wright
Six Straight Weeks of Pessimism
The persistence of today's bearish sentiment is also noteworthy. The AAII Bull-Bear Spread has now been negative for six consecutive weeks, something that historically occurs only about once every 17 months.
Previous periods of sustained pessimism have generally been followed by favorable market performance. Across the other 27 instances in which the AAII spread reached a sixth consecutive negative week, the S&P 500 subsequently averaged a 13.6% return over the following year.
Longer stretches of negative sentiment have historically produced even stronger subsequent returns, although there have been fewer occurrences and, as always, past performance cannot guarantee future results.
Source: Nasdaq Dorsey Wright
A Surprisingly Skeptical Bull Market
Perhaps the most interesting part of the current environment is not simply that investors are cautious — it's that they have remained cautious while stocks have performed exceptionally well.
There have already been bearish streaks lasting 15, nine, and seven weeks since the beginning of 2025. Over the past two years, the AAII Bull-Bear Spread has averaged just 2.4%, a more pessimistic reading than approximately 87% of comparable two-year periods dating back to 1987.
Normally, investor sentiment tends to follow market performance: when stocks rise substantially, investors become more optimistic. Recently, that relationship has weakened. From August 28th, 2024 through August 28th, 2026, the S&P 500 gained approximately 38% cumulatively, yet investor sentiment remained unusually subdued.
That disconnect between strong market performance and persistent investor skepticism is worth watching.
Source: Nasdaq Dorsey Wright
What Does It Mean for Investors?
There have been only a handful of historical periods when investors remained bearish on average over a two-year period despite the S&P 500 gaining more than 20%. In the six previous instances cited in the data, the S&P 500 subsequently averaged a 16.2% return over the following year and 27% over the following two years.
That certainly doesn't mean similar returns are guaranteed today. Sentiment is only one piece of a much larger investment picture, and markets can change direction quickly. But history does offer an important reminder: investor pessimism and market weakness are not necessarily the same thing.
In fact, bull markets often advance despite — or perhaps partly because of — a healthy amount of skepticism. When investors are already overwhelmingly optimistic, there may be fewer potential buyers remaining on the sidelines. When skepticism remains elevated, improving economic conditions, earnings, inflation, or monetary policy can potentially provide reasons for cautious investors to become more constructive.
Warren Buffett famously advised investors to “be fearful when others are greedy and greedy when others are fearful.” Today's sentiment data suggest plenty of caution remains, even after a strong two-year advance.
For long-term investors, the takeaway isn't to become bullish simply because others are bearish. Rather, it's a reminder that emotion and popular opinion rarely make a good investment strategy. Maintaining discipline, diversification, and a long-term perspective remains far more important than trying to predict the market's next move based on how investors feel today.
Source: Nasdaq Dorsey Wright
The current reading for the PR4050 is: U.S. Equity Core = 98.59% & Money Market = 7.75%. For the PR4050 indicator to trigger and alert us when we should consider moving to cash, U.S. Equity Core must be 40% or below and Money Market must be 50% or above.
Source: Nasdaq Dorsey Wright
Below is the most recent D.A.L.I. (Dynamic Asset Level Investing) Indicator showing International Equities and Domestic Equities in the top two spots, while both maintain a commanding lead over Cash and Fixed Income.
Source: Nasdaq Dorsey Wright
P.S. If you believe this information would be of benefit to anyone you know, please share this communication with them. Also, if you, or someone you know, would like to be added to the weekly market update, please click here to provide us with the e-mail address.
Main Street Wealth Advisors
33801 1st Way South, Suite 271
Federal Way, WA 98003
Office: (253) 944-1047
Fax: (253) 944-1075
ART - 1171047
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.
These views are those of the author, not of the broker-dealer or its affiliates. This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. All investments involve risk, including loss of principal. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. All indices are unmanaged and may not be invested into directly.
Technical analysis is based on the study of historical price movements and past trend patterns. There is no assurance that these movements or trends can or will be duplicated in the future. Nasdaq Dorsey Wright developed the indicators described above. They have been prepared without regard to any particular investor's investment objectives, financial situation, and needs. Accordingly, investors should not act on any recommendation (express or implied) or information in this report without obtaining specific advice from their financial advisors and should not rely on information herein as the primary basis for their investment decisions.
Nasdaq Dorsey Wright’s “DALI" employs relative strength-based analysis to rank macro asset classes based on developing leadership trends within the global capital markets. The objective guidance within DALI provides the tools necessary to properly allocate portfolios across all major asset classes in an effort to emphasize strength wherever it exists. Domestic Equities, International Equities, Commodities, Currencies, Fixed Income and Cash are evaluated daily to identify dynamic developments across investment genres, as well as within them. This tool provides the tactical precision that allows investors to adapt as the market leadership changes.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The S&P 500® Index: A free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500® are those of large publicly held companies that trade on either of the two largest American stock market exchanges: the New York Stock Exchange and the NASDAQ.
MSCI World Index: A broad global equity index that represents large and mid-cap equity performance across 23 developed markets countries.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.