Lloyd Blankfein disagrees with Jeremy Grantham on the stock market: It's not as bad as it seems

• This year's stock market decline has flipped sentiment, turning most investors overly negative.
• But former Goldman Sachs CEO Lloyd Blankfein reminded investors that any good news could send stocks higher.
• "Positives may be lurking. Fed pause, Ukraine truce, China lockdown end, etc. Sentiment can shift suddenly," he tweeted.

Former Goldman Sachs CEO Lloyd Blankfein reminded investors that despite all the bad news this year, the stock market could still move higher.

Investors have had to deal with a months-long bear market, where every meaningful rally ultimately unraveled and led to new lows. The S&P 500 was down 25% at its year-to-date low as investors continue to grapple with persistent inflation and an ever-tightening Federal Reserve.

The Fed is expected to raise interest rates by another outsized 75 basis points at the conclusion of its FOMC meeting this Wednesday. And unless inflation shows signs of easing between now and December, the Fed will likely hike rates by at least another 50 basis points, if not 75, at its year-end meeting.

But according to Blankfein, sentiment has shifted overly negative as market participants digest the continuous flow of bad news.

"Seems EVERYONE negative on the [market] with sticky inflation, more rate hikes, other bad stuff ahead," he tweeted over the weekend. He's not wrong: the weekly AAII Investor Sentiment survey has registered historic bearish readings over the past month.

And when that happens, it's usually a good time to take the other side of the trade. "Inconceivable for all pundits to be right, but often all are wrong," Blankfein tweeted.

His tweet was a re-tweet of a Wall Street Journal article that interviewed investment professionals to gauge where they see the market going forward. Most viewpoints in the article were of the thinking that volatility and inflation are not going away, and therefore the market will more likely than not trade lower instead of higher.

GMO's Jeremy Grantham said the fundamentals are as bad as "we have ever seen," adding that the US stock market is in the early stages of deflating a "super bubble."

Blankfein couldn't disagree more.

"You think things have never been scarier? Really? We lived through the Cuban missile crisis when we were stopping Soviet ships in international waters. These are really the most polarized times? I was around in 1968 when there were assassinations of public figures, when kids were blowing up draft centers, and the national guard was shooting on campuses. We got through that, we'll get through this," he said.

"It's never as bad as your worst fears or as good as your best hopes," Blankfein added.

He said that any good news could reverse the woes of stocks and lead to a move higher.

"The bad news is so stacked up that people are under-appreciating the fact that there are several plausible pieces of good news that could affect the market positively... markets are not just the current economy, they look ahead," Blankfein told the Wall Street Journal.

So, what good news could send stocks higher? According to Blankfein, there are plenty: "Positives may be lurking. Fed pause, Ukraine truce, China lockdown end, etc. Sentiment can shift suddenly."