Research suggests that low investor sentiment is actually a contrary indicator, meaning that when it's down, the market is more likely to start rising soon. The idea is that by the time the crowd is feeling glum about the market, it's time to start buying.
The spread between bullish and bearish investor sentiment (bullish minus bearish sentiment) is weakly correlated to the weekly return of the S&P 500 — but it's lagging. So it's correlated with negative events that have already happened.
The correlation disappears or even becomes slightly negative when you compare the survey results to the weeks after it comes out. That suggests that you can't rely on investor sentiment as an indicator that the market may tank. If sentiment is low, the worst is likely over.
Market analysis using the Kensho tool shows that while you could lose money by selling stocks during a week with poor sentiment, there's no indication that you can be sure to benefit from buying during times when investors are bearish. Analysis on the stock market's return at one, three and six months after a low sentiment score, as well as a full year in the future, showed that none had statistically significant returns above the historical norm in any sectors.
So if you buy during a period of low sentiment, you can't expect with reasonable certainty to gain beyond the typical return for the market over a given time period.
The only statistical significance was if you bought stocks a month before investors' sentiment was this low and sold the day the survey came out. In that case, you'd be down a median of 4.5 percent. That means the only thing investor sentiment is actually showing is that the market has been performing poorly and you shouldn't take it as a sign to sell.