Retail Investor Sentiment Is Crashing After FedEx Profit Warning, Bleak CPI Report

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 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.