An extremely rare signal just triggered on the stock market
A powerful contrarian indicator has just flashed on the S&P 500.
For the past eight weeks, more than half of all investors have been bearish, a level of sustained pessimism not seen in 35 years—not even during the dot-com bust, the 2008 crisis or the COVID crash.
Past performance isn’t a reliable indicator of future results
What’s driving the panic?
Two key metrics explain why market sentiment is at rock bottom:
- Investor sentiment surveys. The AI Bears weekly poll shows 62% of investors expecting a downturn over the next six months—higher than at the bottom of the 2022 bear market or the March 2020 crash. Only in the depths of 2009’s financial crisis was sentiment as bleak.
- Volatility Index (VIX) spike. On 8 April, the VIX leapt to 52—its highest reading since early 2020—after fresh tariff threats. It remained above 45 for three straight days, a feat only matched during the 2008 and 2020 sell-offs.
Such extreme fear is usually driven by worries that tariffs will squeeze corporate margins, reignite inflation and force the Bank of England to raise rates—or even tip the economy into a recession.
Why this could be a buying opportunity
When everyone is fearful, markets often surprise to the upside:
- Historical rebounds. After the AI Bears reading topped 60% on five previous occasions, the S&P 500 gained an average of 14% over the next six months and 22% over the next year.
- VIX Precedents. In March 2020, the VIX spiked to 82. Two weeks later, markets bottomed—and the NASDAQ 100 doubled within 12 months.
“Be fearful when others are greedy and greedy when others are fearful.”
Warren Buffett
The big caveat: 2008 vs. 2020
Not all fear-driven sell-offs end in swift recoveries. In 2008, the VIX spike preceded months of falling markets as systemic risks unfolded. The key difference today is the absence of frozen credit markets and collapsing banks—yet mounting tariff tensions could morph this into a deeper downturn.
Will markets rebound or roll over?
Since 1928, the UK and US have each endured nearly 30 bear markets—but only half led to recessions. And when bear markets did occur, they rarely lasted more than a year, compared with five-year average bull runs.
Bull vs. Bear statistics since 1928:
| Market phase | Number of occurrences | Led to recession? | Average duration |
| Bear markets | 27 | 15 (56%) | < 12 months |
| Bull runs | 27 | N/A | 5 years |
Source: Capital.com analysis
How to navigate extreme rear
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Use contrarian wisdom. When sentiment and volatility hit extremes, consider whether the market is oversold and ready for a bounce.
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Manage your risk. Volatility can stay elevated—use stops, diversify across asset classes and size positions conservatively.
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Look for confirmation. Wait for technical signals (e.g., oversold RSI, bullish volume patterns) or fundamental surprises to validate a turnaround.
Key Takeaways
- A rare confluence of bearish sentiment and a VIX surge has set a contrarian warning on the S&P 500.
- History shows such panic often precedes strong rallies—but deep systemic risks can delay recoveries.
- Balance contrarian insights with disciplined risk management and await confirming signals.
At Capital.com, we’ll keep tracking sentiment surveys, volatility indicators and macro developments to help you make informed trading decisions.
For more insights, visit our Educational Hub.