What does "market sentiment" refer to in investing?

Market sentiment refers to the overall attitude and psychological outlook of investors towards a particular security or the financial market as a whole. This sentiment is shaped by various factors, including news, economic indicators, and broader macroeconomic conditions, leading to bullish or bearish views about future performance. When the majority of investors feel positive about market trends or a specific stock, this creates a bullish sentiment, often leading to increased buying activity. Conversely, negative sentiment can result in more selling and a general decline in securities prices.

The concept goes beyond just the numerical data of stock prices; it encapsulates the emotional and psychological aspects of investing, which can significantly influence market trends. While company management actions, interest rates, and historical stock price data are relevant aspects in the investment landscape, they do not encapsulate the overarching investor mood that defines market sentiment.