Goldman Sachs said that a worsening risk appetite among investors might actually mean now is the time to buy stocks. The giant Wall Street investment bank said that its risk appetite indicator recently turned negative for the first time since March, a contrarian signal that led Goldman to shift tactically to an overweight recommendation in equities for the next three months.

Investor sentiment has worsened in recent weeks following a sharp drawdown in artificial intelligence plays, including semiconductor makers and stocks in South Korea. Last week, the iShares Semiconductor ETF notched a ninth straight day of losses, the longest such decline in 20 years. The selloff could have created a meaningful enough base from which investors can start to add back exposure, given that strong earnings, lower stock valuations and lighter positioning suggest renewed upside ahead, Goldman said.

"Near term there might be more volatility due to AI concerns, Middle East tensions and midterm elections, but we think earnings support with lighter positioning and lower valuations should help equities into year-end," London-based head of asset allocation research Christian Mueller-Glissmann wrote in a note.

Whole Goldman may be more optimistic, the bank continues to carry an overweight recommendation for cash, and is underweight credit and neutral duration.

Goldman Sachs is not the only firm to regard a recent increase in bearish sentiment as a favorable, contrarian signal. Wells Fargo's buy/sell sentiment gauge crossed the -1 level last week, and Macro Risk Advisors noted that its market sentiment score had plunged to around 27 from roughly 61.