There is a lot of fear about holding US assets right now. This fear is exactly what makes long-term investors like us smell an opportunity. Why? Because history shows that the best time to invest is often when everyone else is deeply pessimistic.
A well-known survey from the American Association of Individual Investors (AAII), which has tracked investor sentiment for nearly 40 years, shows that people are now as bearish (negative) as they’ve ever been. The only time the survey was this gloomy was in 1990 and right after that, US stocks had a very strong year.
One expert, Brian Belski from BMO Capital Markets, is especially vocal about this. He believes the extreme negativity among investors is actually a strong signal to buy. He says conversations with clients in Europe and Canada are full of doom and gloom. According to him, people love to talk about the “end of American greatness.” But he thinks they’re letting emotion cloud their judgment.
Another reason for his optimism? Analysts are slashing their earnings forecasts for companies in 2026. Historically, when predictions get this negative, they often turn out to be wrong, and the market tends to bounce back with stronger-than-average returns.
Back in March 2008, the same AAII survey also showed extreme pessimism. The market had already dropped 20% and then went on to lose another 40% during the financial crisis. So sentiment is not always a perfect guide. When truly massive crises hit, it doesn’t help.
Also, when you look at the chart of historical investor sentiment, you’ll notice that the low points usually come after a big stock market drop. That was the case in 1990, 1998, 2002, 2008, 2009, and 2022. Today, stocks are only down about 10% from their February highs, not a huge drop.
Further, while surveys show retail investors (individual investors like you and me) are worried, data from VandaTrack shows that they’ve still been buying during recent dips. In early April, there was a noticeable increase in retail buying, meaning people were trying to take advantage of lower prices even as they said they were nervous.
Other measures of sentiment, which look at actual trading behaviour (not just survey responses), don’t look quite as negative. One example is Citi’s “Levkovich Index,” which combines things like short selling, margin debt, and options trading. While that index has dropped, it’s only in the middle of its historical range. That suggests investors aren’t as scared as the surveys make it seem.
So, while pessimism is high, not all the usual warning lights are flashing at once. A stronger signal to buy might come if prices drop further and if the dip-buying behaviour stops. In other words, when things feel even worse, then it might be time to get even more optimistic.
At Dominion, we’re not overly worried that this is another March 2008 situation. We don’t think the US economy is on the brink of complete disaster.
The recent market jitters seem to come from the Trump administration’s economic policies, which are unpredictable, but might not be as dangerous as they look.
Trump’s team doesn’t tend to stick with their plans when markets push back. They’ve already backed down on several major threats: tariffs on Chinese electronics, tariffs on other countries, and Trump’s threats to fire the head of the Federal Reserve. Each time, when faced with market resistance, they folded.
Could Trump stick with extreme tariffs on China? Possibly. But based on past behaviour, we think he’ll back off again if the market reacts badly enough.
While the outlook is far from rosy, the combination of widespread fear, overly negative earnings forecasts, and a history of markets bouncing back from similar lows makes this an interesting moment to consider buying US stocks when everybody else is selling.
Disclaimer: The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Capital Strategies Limited or its related companies. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.
