AI’s View of the 2025 Market: Human Investors Are Too Pessimistic, Think They Have Evolved, but Their Behavior Remains the Same

According to Zhuifeng Trading Desk, Deutsche Bank has just released a report in which its AI system, dbLumina, conducted a “ruthless” analysis of market sentiment for 2025. The conclusion is blunt and piercing: In the eyes of AI, human investors are overly pessimistic; their investment behaviors are filled with irrationality, emotion, and cognitive biases. Despite believing themselves to have evolved and to be living in a “new investment world,” their behavioral patterns and psychological traps are exactly as before.

The report’s core insights for investors can be summarized as follows:

Ironclad evidence for contrarian investing: AI confirms that investors exhibited the most extreme “irrationality” (i.e., fear) during the market’s lowest point (April 2025). Contrarian strategies—being greedy when others are fearful—have been proven absolutely correct this year.“Ecstasy” signal at the peak of fear: The most shocking finding was that AI only detected “ecstasy” emotions during the worst market sell-offs in April and May, when fear was at its highest. This became a perfect buy signal, suggesting some investors panic-buy after excessive selling.The illusion of evolution: Investors generally believe that “things have changed,” but AI analysis shows the market is still dominated by old cognitive traps such as “recency bias” and “availability bias.” This means investors are still trading based on the latest news and emotions, without genuine evolution.The lag of human emotion: AI-generated sentiment indices were more optimistic than U.S. retail investor surveys throughout almost the entire year and rebounded faster after market downturns. This suggests AI can “see through” short-term panic, while human investors remain mired in it. Chasing short-term emotion-driven sell-offs proved to be the losing strategy this year.

Deutsche Bank’s research method was to input daily market commentary from January to October 2025 into its proprietary AI system dbLumina and ask it to quantify market psychology. A key analysis is the "Rationality/Fear Index," with a score range from -1.00 to +1.00; negative scores indicate the market tending toward fear and overreacting to external negative factors.

Results showed investors were in an “irrational” state for most of 2025. The index hit its lowest in April, when markets were in a deep panic sell-off. Ironically, AI pinpointed this “irrationality”—since the March low, the S&P 500 rebounded 23%, confirming AI’s judgment at the time.

The report also found an intriguing trend: Over time, as market uncertainty eased, investors’ “rationality” increased. This reveals a brutal truth: Only in calm, inconsequential moments do investors act rationally; once uncertainty arises, they immediately revert to instincts of fear and overreaction.

The Paradox of Emotion: “Ecstasy” After Panic Selling, Vanishing Greed Amid The Rally

When dbLumina was tasked to analyze four core market emotions—fear, greed, ecstasy, and anxiety—the results were full of contradictions and paradoxes.

The dominant emotion throughout the year was “anxiety.” Whether the market rose or fell, this emotion persisted relentlessly.

Yet the most crucial discovery appeared at the market bottom. AI analysis showed “ecstasy” only surfaced once this year, precisely at the most severe sell-off in April and May. The report speculates this was because some investors jumped desperately back in after panic selling. This flash of “ecstasy” at peak fear marked the best buying opportunity.

Another anomaly: After the steep market drop in April, even though stocks steadily rebounded to new highs, investors’ “greed” declined while “anxiety” rose. This completely defies the rational logic of “buy low, sell high,” instead reflecting the typical retail mindset of “the higher it goes, the more afraid.” “Fear of missing out” was also rare, briefly appearing only when the market was hot in February.

Cognitive Biases: Driven by Short-Term Events

In 2025, the phrase investors repeated was: “We’re operating in a brand new investment world.” But the AI’s analysis mercilessly exposed this as an illusion.

The report points out two main cognitive biases dominating the market this year: “recency bias” and “availability bias.” This means the so-called “new world strategies” are essentially relying on the most recent information for decision-making, no different from old erroneous patterns.

AI divided the psychological evolution of 2025 investors into three stages: from high sensitivity to geopolitics and rates at the start of the year, to increased resilience to trade wars in mid-year, and finally to normalized acceptance of uncertainty late in the year. The core, however, remains reactive behaviors driven by short-term events.

Misread Fear: AI Is More Optimistic Than Humans

AI also found that the fears investors focus on do not fully match the actual market-driving fears. For example, Deutsche Bank’s commentary mentioned the labor market 61 times during the year, but AI analysis showed the labor market never ranked among the top three investor fears in any month. Investors were misled by their self-created sense of fear.

Even more convincingly, when comparing dbLumina’s sentiment index with the net bullishness data from the U.S. Retail Investor Association, a clear picture emerges: AI’s sentiment was more optimistic than human investors almost throughout 2025, especially during and after April’s turmoil.

AI’s sentiment index rebounded much faster after market bottoms than the stock market itself, demonstrating its ability to recover quickly from short-term negative events. For investors, this means keeping calm and tuning out noise is a wiser approach during market drops. As the report concludes: Selling due to short-term downturns was a mistake this year.

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