Bearish sentiment is actually good for the stock market. Here’s why!
| From the desk of Miles Everson: Investing has helped many attain financial security and independence over the last several decades. That’s why every Wednesday, I share investing insights to help others build their wealth through this activity. In today’s “The Independent Investor,” I’ll talk about why bearish sentiments for 2026 isn’t a bad thing for the stock market. Curious? Keep reading below to know why! |
Bearish sentiment is actually good for the stock market. Here’s why! Investors are bracing for a rough 2026 and many seem to think it'll be tougher across the board than 2025. This is a sentiment shift we talked about in a previous “The Independent Investor” article. Americans have grown less confident that the stock market will rise this year and more confident that unemployment will climb. That kind of skepticism can spread fast. People tend to feel negative emotions, like fear of loss, more than they do the joy of a gain. Believe it or not, this isn't a bad thing. Markets tend to work best when investors are cautious and sentiment leans more neutral. Why? It’s because when the crowd is already thrilled, good news has nowhere to go. When the crowd is wary, good news can keep surprising to the upside. While investors are getting more guarded, economists are as bullish as they've been in the past year. That gap in expectations is setting up a compelling opportunity for 2026.
America is outpacing its peers when it comes to productivity… and AI is a big reason for those gains. The U.S. has invested more aggressively in AI than any other region. In 2024, for example, we spent more than USD 109 billion on AI—over 10 times more than the second-largest spender, China. Those investments are showing up in the numbers. According to the Organization for Economic Cooperation and Development (OECD), U.S. labor productivity—measured by GDP per hour worked—rose 10% between 2019 and 2024. Productivity was largely flat for the U.K. and the eurozone over the same stretch. That's no accident. In a recent survey by the Financial Times (FT), economists suggested that the U.S. wins on four fronts:
Nina Skero, CEO at the Centre for Economics and Business Research, called AI and related digital tech “the new productivity frontier.” She said the U.S. leadership in investment and development should extend its lead. What’s more? When you ask other economists about the same data, you end up with a lopsided answer. In that same FT poll, 31% of respondents said the U.S. would retain its productivity advantage. Another 48% said the advantage would extend. Said another way, more than three-quarters of experts think America will keep its lead, if not widen it. FT also asked economists for their 2026 GDP growth predictions in each quarter of 2025. The latest results reflect their bullish outlook. The U.S. is the region with the highest expected GDP growth, at more than 2%. It's also the only region with higher expectations as of the fourth quarter of 2025 versus the start of last year. Take a look...
The American public might be cautious, but the economists aren't. They're confident the economy is on a good path heading into 2026. That said, it’s safe to say the market doesn’t need euphoria for stocks to climb. … and according to Professor Joel Litman , Chairman and CEO of Valens Research and Chief Investment Officer of Altimetry Financial Research, this is the best possible scenario . Besides, it’s easier for markets to deal with uncertainty when the economy is gaining speed. Moreso, it's easier for rallies to extend when the crowd still insists the next year will be worse. Productivity gains should keep widening the gap between the U.S. and its global peers. As long as that's true, investors don't need to see universal confidence in 2026. Hope you’ve found this week’s insights interesting and helpful. Stay tuned for next Wednesday’s The Independent Investor! In every technological revolution, there comes a moment when the spotlight shifts. Learn more about the “hidden” side of the AI boom in next week’s article! |
Miles Everson
CEO of MBO Partners and former Global Advisory and Consulting CEO at PwC, Everson has worked with many of the world's largest and most prominent organizations, specializing in executive management. He helps companies balance growth, reduce risk, maximize return, and excel in strategic business priorities.
He is a sought-after public speaker and contributor and has been a case study for success from Harvard Business School.
Everson is a Certified Public Accountant, a member of the American Institute of Certified Public Accountants and Minnesota Society of Certified Public Accountants. He graduated from St. Cloud State University with a B.S. in Accounting.
