A wave of optimism has swept through retail investors following the Federal Reserve's decision to lower interest rates.

According to a recent survey by the American Association of Individual Investors, there has been a positive shift in individual investor sentiment, fueled by the Fed’s recent rate cut. The survey reveals an increasingly bullish mood, with expectations for stock market gains over the next six months rising by 11 percentage points to 50.8%.

AAII experts find this surge in optimism remarkably high and striking, noting that bullish sentiment has surpassed its historical average of 37.5% for the 45th time in 46 weeks.

Meanwhile, neutral sentiment, which reflects expectations that stock prices will remain unchanged, dropped by 6.5 percentage points to 22.8%. This marks the 11th consecutive week that the reading has fallen below its historical normal of 31.5%.

Bearish sentiment representing expectations of a decline in equity prices lost 4.5 percentage points to settle at 26.4%, falling below its historical average of 31% for the fifth time in six weeks.

As a result, the spread between bullish and bearish sentiment widened by 15.6 percentage points to 24.4%. This is the 19th time in 20 weeks that the reading has been well above the historical average of 6.5%, indicating a sharp divergence in investor outlook.

Market participants identify economic conditions and inflation levels as the primary drivers influencing stock performance, followed by central banks' interest rate decisions.

This survey reflects a shift in sentiment among retail investors, largely driven by recent changes in monetary policy and evolving economic expectations.