Market sentiment refers to the general attitude or mood of investors toward a stock, sector, or the market as a whole — ranging from optimistic (“bullish”) to pessimistic (“bearish”). It can shift prices even when no new, concrete facts about a company have changed, purely through collective psychology, herd behavior, or reaction to rumors.
Why It Matters
Sentiment explains why prices can move sharply on relatively little hard information, and why short-term price movement is often harder to predict than longer-term, fundamentals-driven trends.
Related Reading
See how sentiment fits alongside demand/supply and company-specific factors in How Stock Prices Move: Demand, Supply, and Market Sentiment.