by Jason Bodner
March 31, 2026
People are always looking for confirmation. We trust online ratings before buying a $2-product. We notice what cars others drive. We feel stronger when we move with the crowd. It’s part of our basic wiring.
In the famous conformity experiments by Solomon Asch, people knowingly gave wrong answers to simple questions just to match the group. At times, over 70% conformed to a knowingly wrong answer at least once – proof that people will ignore what they clearly see – just to stay aligned with the crowd.
That same instinct carries into the stock market and the world of investing. Most investors aren’t driven by conviction. They’re driven by comfort zones. They want an excuse to act, or an excuse to do nothing.
When markets drift higher, everything feels fine. Money flows automatically into 401(k)s as people buy on schedule, without thought. That steady participation smooths things out. It’s the market’s default state.
But when volatility returns, mass psychology shifts. As stocks run higher, investors feel rising pressure to act. In rising markets, the fear of missing out (FOMO) creeps in. Prices feel expensive, but people still want to buy now, because everyone else is making money. That’s usually when the buying risk is highest.
On the down-side, when markets fall hard, fear takes over. Investors start asking how much worse it can get. They worry about losing years of savings. The instinct is to pull back, to head for the exits.
History shows those are often the worst moments to sell – and the best moments to buy.
But here’s the reality: Most investors don’t do either one. They don’t buy near the top, and they don’t sell near the bottom. They don’t act in between, either. They stay put – because that’s where the crowd is.
I call his “the neighbor test.” When markets are hot, my neighbors ask me if they should buy stock names that have already run higher. They feel late, uneasy, but still tempted. Most of the time, they don’t act.
When markets are falling, they ask me how bad it will get. I ask them one thing: Did you sell anything?
The answer is almost invariably “no.”
So, if most people aren’t actually trading on fear or greed, what’s driving these big day-to-day moves?
It’s the professionals! Money managers, hedge funds and big traders are moving stocks. They act because their job is to outperform market benchmarks. They tend to push prices higher, then sell into strength. They also drive prices lower, then buy them back from weak hands. Algorithms amplify these swings.
Meanwhile, the steady inflows from everyday investors act like ballast, stabilizing the market. When that flow slows during periods of fear, volatility rises. Without that constant bid, prices move more violently.
This volatility feeds emotion. And emotion feeds the narrative.
One week, we see AI disruption crushing software. The next week, it’s geopolitics. Then it’s oil, inflation, or recession fears. The headlines shift, but the effect is the same. Sentiment drops, and stocks follow.
Now we’re back in that environment. Stocks are falling again, so confidence is fading.
But context matters. When everything feels chaotic, I step back and let the data do the talking. First, this is a mid-term election year, historically the weakest year in the four-year cycle. Volatility is not unusual.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
In mid-term election years, Quarters 2 and 3 are typically the weakest. Then, the fourth-quarter surges:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
At 44%, the Big Money Index (BMI) reflects this change. It is falling and now sits at its lowest level since last April’s “Liberation Day” sell-off. On April 8, 2025, the BMI bottomed at 35.4%. Based on the current pace, we could revisit that level as early as this Friday, but more likely next week, April 6 to 10.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.