Individual investors are more bearish than usual, and more bullish than usual, at the same time. The AAII Sentiment Survey for the week ended September 2 put bearish sentiment at 37.6%, six points above its 31.5% long-run average, while bullish sentiment rose to 39.7%, itself above its own historical average of 37.5%. That split matters more than either number alone, and Tuesday’s TSX session showed exactly why.
The Availability Heuristic Is Doing the Explaining
Tversky and Kahneman’s 1973 research on the availability heuristic described a specific mechanism. People judge how likely and how important an event is by how easily examples of it come to mind, not by its actual mechanism or base rate. A vivid, repeated headline becomes the default explanation for anything that happens near it, whether or not it is the actual cause.
Iran’s warning this week that it will act against any threat, even before it is carried out, is exactly this kind of headline. It is specific, it is threatening, and it is tied to the Strait of Hormuz, so it is the first explanation an anxious investor reaches for when Canadian equities fall. On Tuesday, that explanation does not fit the data.
What Actually Moved the TSX
The S&P/TSX Composite closed at 36,300.16 on Tuesday, down 213.64 points, weighed down by weakness in technology, telecommunications and industrials. Energy, the sector that would have carried a genuine Hormuz shock, moved the other way. WTI crude gained US$1.24 to close at US$92.72, and the Canadian dollar strengthened to 72.62 cents US.
A rising oil price and a stronger loonie are not the signature of a Middle East supply disruption working through Canadian equities. They are the signature of a narrower, sector-specific move that the geopolitical headline is simply more available to explain than the actual cause, whatever that turns out to be.
AAII’s weekly bullish and bearish readings across the past fourteen weeks track a market that has stayed anxious through several distinct catalysts, and the current bearish reading sits well above the level where that anxiety typically resolves.
Bearish sentiment eased from 44.4% in late August to 37.6% but stayed 6.1 points above its 31.5% long-run average, while bullish sentiment rose to 39.7%, also above its own average. Source: AAII Investor Sentiment Survey, week ended September 2, 2026.
The Split Reading Is the Real Signal
A bearish reading above average alongside a bullish reading above average is not indecision. It is two different groups of investors responding to two different sets of information, both convinced they are right, with the historical average sitting between them. Odean’s research on investor overconfidence found that traders most convinced of their own read trade the most and, on average, perform the worst.
That is the population an advisor is dealing with this week: some clients pricing in a supply shock that Tuesday’s own energy and currency data did not confirm, others pricing in a resilience that a further Hormuz escalation could still puncture. Neither group has bad information. Both are anchored to the story that is easiest to recall, not the one the sector data is actually telling.