Today's Extreme Fear Matches the 2009 Bottom Exactly  | | Robert Ross
Speculative Assets Specialist | Do you feel a chill in the air? A cold that lingers long after the closing bell... You're not imagining things. There's this blanket of worry draped over the markets. And it hasn't been this intense in quite some time. President Trump's economic policies have spooked investors, and rightfully so. If you resurrected Austrian economist Milton Friedman to ask his opinion, he would surely proclaim the president is intentionally trying to plunge the US economy into recession. The mercurial pronouncements boggle the mind: - Slapping unilateral tariffs on our biggest trading partners
- Slashing government spending to the point of austerity
- Firing government employees beyond bare bones
It's culminating in a recipe for slower growth, higher inflation, and higher unemployment - the three horsemen of "stagflation." Everything the Trump administration does is entirely out of my control. However, I can decide how I will react as an investor. Because every time people were this jittery in the past, it was a clear buying opportunity. Human Nature Never Changes The stock market is a reflection of human nature. Human nature doesn't change. Fear and greed are the two emotions that drive markets - and they do so in predictable cycles. When the herd is overwhelmingly bearish, like they are now, it often means panic selling is in full swing. This creates opportunities in undervalued stocks for those who can keep their heads. Historical data backs my assessment. The AAII sentiment surveys have been around for decades. It consistently shows that extreme pessimism often precedes major market rallies. For example, during the 2008 financial crisis, bearish sentiment hit 70% in March 2009 - right before the S&P 500 shot up 50% over the next year. In October 1990, fears over the Gulf War were high, and a 54% bearish reading came just before a 20% gain in six months. This works simply because when fear takes over, rational buying steps in and reverses the trend. Daniel Kahneman and other behavioral finance experts have shown how our cognitive biases amplify these market cycles, which is why sentiment is one of my favorite contrarian indicators. And this indicator is giving us a clear signal right now. Rare Pessimism at Market Bottoms The latest AAII sentiment survey (from February 26) shows 60% of investors are bearish, with only 14% bullish. 
View larger image You don't see numbers like that very often. When they do show up, they have historically marked significant market bottoms. Take a look at the history: - August 16, 1990: S&P 500 down 7.6%, then up 17% in a year.
- March 4, 2009: S&P 500 down 16.6%, followed by a 55.5% surge in six months.
- April 27, 2022: Mid-bear market with the S&P 500 down 8.45%, rebounding 14% in nine months.
- September 22, 2022: S&P 500 down 22%, followed by a 17% rally over the next year.
Every single one of these moments felt awful at the time. 
View larger image And yet, each was a prime buying opportunity. The S&P 500 gained an average of 50% to 90% the following year. Uncertainty and "fear" created these buying opportunities. They go hand in hand. It just feels awful at the time. Now Is the Time to Stay Disciplined I know there is a lot of uncertainty right now. But if history is any guide, these are the exact moments when smart investors make their fortunes. When fear is this high, I'm looking to buy undervalued assets like Redwire (RDW) or OppFi (OPFI). Stay disciplined, stick to your strategy, and don't let the noise shake you out of the market. You don't make real money when everything feels good - you make it when everyone else is panicking. And I intend to show my readers how to make gobs of money. Stay safe out there, Robert Want more content like this? | | | | | | 
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