Everyone is bearish but one expert has revealed he's personally started buying ASX shares.
Montgomery Investment Management chief investment officer Roger Montgomery is detecting wholesale pessimism in the industry at the moment.
"Talking to brokers, other fund managers and economists, I don't find many people who are very bullish at all. In fact, most of them expect another leg lower in the stock market," he said on a Montgomery vlog.
"Bearishness pervades almost every corner of the market at the moment."
But to Montgomery, such unanimous despair means the opposite.
"For me, that starts to become optimistic because if everyone's already bearish, there's not many others left to become bearish," he said.
"Those who are bearish have already sold, there's not many people left to sell, and so it may be that prices are now on the cusp of a bounce."
What can happen from here?
Putting aside sentiment, Montgomery analysed what could logically happen to the economy and stock markets from here.
He explored two different scenarios that could come true.
The first option is that interest rates stabilise without sending the economy into strife.
"If rates stop rising, and if economies don't go into a recession, and we don't get a financial crisis, then there's a very real possibility that the indiscriminate selling that we've witnessed recently becomes something more discerning," he said.
"And buyers return to the market to look for downtrodden, high-quality growth companies."
The second possibility is that by the time rate hikes are done, the unemployment queues have lengthened.
"If that happened, then we would get a much more significant decline in economic growth, and then the possibility of a recession goes up."
I'm buying ASX shares. Are you?
Montgomery thinks the first scenario is much more likely, as he doesn't foresee a recession or financial crisis hitting Australia.
"Then we're in a situation where we've had indiscriminate selling, pushing PE ratios very, very low, and that of course means the possibility of better returns in the future," he said.
"So if indiscriminate selling gives way to more discerning buying, we'll get an expansion of PEs again, and that will increase the return that would normally be available just from the earnings growth."
Montgomery said that he's now started to buy for his personal portfolio.
"My suggestion now is to start dipping your toe back in."
Montgomery doesn't pretend to know whether stock prices will head lower, higher or flatline for the rest of the year.
But that doesn't matter for a long-term investor.
"It could be that the rest of my peers in the market are absolutely correct and we get another leg down. I just don't know," he said.
"But I do know that there are some mouthwatering opportunities already appearing, and rather than try and predict what prices are going to do next, I'd rather start filling my portfolio with wonderful businesses at rational prices."
