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: Most Americans were feeling gloomy even before Thursday’s dramatic dive in stocks — and now they fear a prolonged bear market

In a matter of hours, promising signs from of stock market rally have turned into pessimism, even panic.

For retail investors trying to get their legs during a volatile moment, Thursday’s deep downward lurch is exactly what they didn’t want. But it might be what they knew was bound to happen all along.

A day after markets closed sharply up Wednesday on the news of the Federal Reserve’s 50-basis point interest rate hike — and no likelihood of steeper hikes in the future — they are barreling down Thursday.

“More than half of people say the stock market is heading in a bearish direction through the next six months.”

— Investor sentiment from the American Association of Individual Investors

In afternoon trading, the Dow Jones Industrial Average

is down more than 1,000 points or by 2.9%. And that’s the best of the bunch. The S&P 500

is down 3.3% while the Nasdaq Composite

is down more than 4.8%. This is what a “violent unwinding of crowded positions” looks like, according to one money manager.

So gloom is up and markets are down. Just as retail investors were thinking was going to be the case, according to recent polls and sentiment trackers.

For example, more than half of people (53%) say the market is heading in a bearish direction through the next six months, according to the latest read of investor sentiment from the American Association of Individual Investors.

The results for the seven-day period ending Wednesday are off from the nearly 60% a week earlier who believed a bear market lurked ahead. But that 53% figure is still well above the 30.5% average who think the market is heading for the bear den.

“Some 56% of people are worrying about a market crash, and 43% are too nervous to invest money in the market.”

— First quarter recurring market-perceptions poll from Allianz Life Insurance Company

Meanwhile, 56% of people are worrying about a market crash, according to a first quarter recurring market perceptions poll from Allianz Life Insurance Company.

Around four in ten poll participants (43%) said they were too nervous to put money in the market now, according to the poll. That’s a nine-percentage point increase from the same point last year.

Eight in ten said they are bracing for volatility through the end of the year. High net worth households also said the choppiness is particularly nasty, with 51% saying the market is more volatile than usual, according to a UBS investor sentiment survey released Wednesday.

Another survey on retail investor sentiment, this time from Charles Schwab Corp.
also reflects a worried worldview. While over half of clients were putting money into particular stocks during 2021’s fourth quarter, less than 40% were planning to buy individual stocks in 2022’s first quarter, according to the February findings.

More than four in ten (44%) had a bearish view, up nine percentage points from the same point last year.

The bears are coming, at least in the minds of many. The question is whether a recession is coming too. (“I think we have a good chance to have a soft or softish landing,” Federal Reserve Chairman Jerome Powell said at a Wednesday press conference following the rate hike announcement.)

Still financial advisers caution against drastic alterations to a portfolio. “It’s time to make tweaks to your portfolio. You should not make wholesale changes,” Scott Bishop, executive director of wealth solutions at Avidian Wealth Solutions, based in Houston, Texas, previously told MarketWatch.

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