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Now is the time for contrarian-minded stock investors to show that they actually walk the walk. Contrarians often repeat the maxim to buy when the blood is running in the streets. But if now is not that time, what is? The stock market is plunging in the wake of President Donald Trump’s imposition of wide-ranging tariffs. The Dow Jones Industrial Average DJIA closed down more than 1,600 points in trading on April 3, or about 4%. Meanwhile, the Nasdaq Composite COMP lost almost 6%.

This isn’t to deny that there are sources of concern. The possibility of a global trade war —the proximate cause of Thursday’s market rout — is extremely worrisome. But contrarians’ core belief is that markets overreact. So buying when others are selling pays off more often than not.

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To bolster your contrarian courage, consider the stock market’s historical performance in the wake of extreme pessimism on Wall Street. I measure that by focusing on the average recommended equity exposure level among a subset of several dozen short-term stock market timers that are monitored by my performance auditing firm. This average (which is represented by the Hulbert Stock Newsletter Sentiment Index, or HSNSI) recently fell far enough to be within the 10% of lowest daily readings since 2000 — which in prior columns I have considered low enough to trigger contrarian interest.

The table above contrasts the S&P 500’s SPX average return in the wake of these lowest decile readings and following the 10% of days in which the HSNSI was highest. In true contrarian fashion, the stock market performed significantly worse in the wake of extreme optimism than it did subsequent to periods — like now — in which there was extreme pessimism.

The last time that HSNSI was as low as it is now was in late October 2023, as shown in the chart below. The S&P 500 over the next month gained 10%, and 19.1% over the next three months.

This historical perspective underlines the benefit of objectively measuring market sentiment, as the HSNSI does. Few of us have any recollection of what so bothered investors in October 2023. But bothered they were. The factor that appeared to be concerning them the most at that time was interest rates, since the U.S. Treasury’s 10-year yield BX:TMUBMUSD10Y that month rose to near 5%, its highest level since October 2007 — which is when the 2007-2009 bear market began.