AAII Sentiment Climbs to 2025 High as Bulls Gain Ground—but Euphoria Still Elusive

The latest AAII Sentiment Survey shows optimism climbing to its highest level of the year, reflecting investors’ growing confidence in the market’s resilience yet still falling short of outright exuberance. Bullish sentiment rose to 45.9% in the week ended October 2, marking the most elevated reading of 2025 and a clear shift from the midyear doldrums. The accompanying Bull-Bear spread widened to +10.3 points as bearish sentiment slid to 35.6%, its lowest level since late July. This combination of rising optimism and fading pessimism points to a market that’s gaining conviction, though not to the point of mania.

The move marks a decisive turn from the persistent caution that dominated much of the first half of the year. For most of 2025, bearish sentiment had hovered above 45%, with readings above 50% as recently as March. The inflection began in late August as inflation pressures eased, the Fed’s messaging tilted dovish, and earnings revisions stabilized across key sectors. The latest print confirms that investor mood has continued improving through September’s market rebound, which saw the S&P 500 extend its recovery from the April low.

Indeed, the bullish cohort’s 45.9% reading now sits near the upper bound of the survey’s historical average and is more than double the March trough of 19%. Yet, the tone remains constructive rather than euphoric. The AAII’s “caution within optimism” dynamic implies that many retail investors are only gradually reengaging, leaving potential fuel for further upside if momentum continues. That tension—between improving confidence and residual skepticism—has been a hallmark of this year’s market psychology.

The Bull-Bear spread of +10.3 is another milestone worth watching. It’s the widest since the July 2 reading, which itself marked the start of the Q2 earnings rally. Interestingly, that July high in sentiment coincided with a near-term pause in the S&P 500 before the next leg higher, suggesting that while sentiment gauges often mark consolidation zones, they don’t necessarily signal peaks in bull cycles. The current spread, while constructive, is still far below the +30 readings historically associated with market tops.

Bearish sentiment’s slide to 35.6% represents a significant shift from the 60% readings seen in February, when geopolitical and tariff concerns dominated headlines. The steady erosion in bearishness mirrors improving breadth, as defensive sectors like Utilities and Staples begin to find footing while growth sectors maintain leadership. That rotation has kept market participation healthy, limiting the risk of overheating concentrated in a few mega-cap names.

From a trend perspective, the 8-week moving average of bullish sentiment—currently 35.3%—continues to grind higher, reinforcing the steady normalization of investor psychology. Earlier in the year, this rolling measure languished below 30% for more than two months, underscoring how persistent fear was after the Q1 volatility spike. The last time this moving average held above 35% for multiple weeks was in mid-2023, ahead of a sustained rally.

The timing of this sentiment shift is notable. The S&P 500 has rallied roughly 35% off its April low, making it the fifth-best six-month run in the index’s history. Historically, such sharp rebounds have carried forward momentum into the following year according to Ryan Detrick, Chief Market Strategist at Carson Group. In each of the last five comparable surges, the S&P 500 was higher over the subsequent 12 months—a powerful statistical tailwind for the bulls. The combination of rising sentiment, improving technical breadth, and historical precedent gives the current rally a foundation that appears more sustainable than speculative.

Still, there are important nuances in the data. Neutral sentiment remains steady near 19%, suggesting some investors remain on the sidelines and could represent latent buying power should pullbacks occur. This moderating stance provides a buffer against excessive optimism—a sign the market hasn’t entered “euphoria” territory. As a rule of thumb, the AAII survey tends to flash contrarian warning signs when bullish readings exceed 50% for consecutive weeks, often preceding consolidation or minor corrections. The current setup, while elevated, remains short of those thresholds.

The macro backdrop supports this tempered optimism. Inflation expectations are stable, the 10-year Treasury yield has remained rangebound near 3.8%, and oil prices have retraced from their summer highs. Meanwhile, earnings momentum across key sectors—particularly technology, consumer discretionary, and industrials—has underpinned the broader recovery. The Fed’s September commentary, which emphasized patience rather than preemptive tightening, has also given markets room to breathe.

From a behavioral standpoint, this environment fits the “climb the wall of worry” narrative. Investors are becoming incrementally more confident in the rally’s durability but remain wary enough to prevent complacency. That balance is critical in sustaining bull markets; it implies capital is still available to chase performance if the rally broadens. As one strategist quipped this week, “We’re in the FOMO phase’s opening act, not its finale.”

Technically, sentiment aligns with an S&P 500 that continues to hold above its 50-day and 100-day moving averages, with support consolidating around 6,400 and near-term resistance in the 6,700 zone. As long as bullish sentiment trends higher without breaching euphoric levels, historical precedent suggests the path of least resistance remains up.

The bottom line: The AAII survey’s latest read reinforces the theme of cautious optimism—a market climbing steadily but not excessively. With bullish sentiment at 45.9%, bearishness fading, and historical analogs favoring momentum persistence, the mood among retail investors has turned from disbelief to constructive participation. It’s not euphoric yet—but for equity bulls, that’s precisely what makes it sustainable.