US stocks soared Wednesday, but the S&P 500 is still trying to climb out of slump instigated by President Donald Trump’s trade war. After hitting a record high in February, the S&P 500 dropped into correction in March as Trump unveiled his plan for tariffs. The benchmark index as of Wednesday was still down 12.5% from its peak two months ago. (A 10% decline from a peak is considered a correction. A 20% decline from a peak is considered a bear market). The market has shed $6.5 trillion since its record high in February, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. As stocks have gyrated, investors are wondering when the market might find a bottom. The truth is: No one can know for sure. The market hit its lowest closing price this year on April 8, down 18.9% from its February peak. The S&P 500 has yet to test that low again, and it’s anyone’s guess whether the market continues climbing higher. While uncertainty is rife, history can serve as a guide as to when the the S&P 500 might find a bottom. Four months to bottom, historically The S&P has had 24 corrections since the end of World War II, according to Sam Stovall, chief investment strategist at CFRA Research. Historically, when the S&P entered correction but did not enter a bear market, it took the index an average of 133 days to find a bottom, and an average of 113 days to recover. If April 8 turns out to be the market’s bottom, it would be just 48 days from February’s peak to bottom — much faster than the historical average. Additionally, it has historically taken the S&P 500 an average of 77 days to go from a peak to confirming a correction, according to Stovall. This year, it took the benchmark index just 22 days to confirm a correction (a peak on February 19 to a correction on March 13), which is also much faster than the historical average. Typically, when there is a sharp decline from a peak to correction, the slump tends to be relatively short before the market recovers, according to Stovall. “Swift declines tend to be shallow and short-lived,” he said. “History is a great guide, but it’s never gospel, so we’ll have to wait and see whether that will hold true.” And vast uncertainty looms. The market correction this year has been driven by the White House’s policy, Stovall said, which is historically rare. “The only problem is that this is what I call a manufactured correction, meaning that it started because Trump initiated a trade war,” he said. “It is because of what the current administration is doing.” Retesting the low and 1987 The S&P 500’s closing price on April 8 was 4,982.77. Some Wall Street analysts expect the market to “retest” that low before finding a bottom. “In order for the April 8th lows to hold, investors must see enough of a trade policy shift to give them hope that the worst has passed,” said Nick Colas, co-founder of DataTrek Research, in a Monday note. Colas noted that “modern market lore” about retesting lows can go back to the 1987 market crash. On October 19, 1987, The S&P 500 plummeted 20.5% before rebounding about 14% across the next two days. Yet the benchmark index struggled to hold onto those gains and eventually retested its October low point in December. Despite briefly falling below the October low, the December retest turned out to be the bottom. “Then … the index rallied 10.3% through year end,” Colas said. “Investors saw that as an ‘all clear’ sign, and the S&P went on to gain 16.5% in 1988.” Colas noted that not every market slump historically needed to retest its low, though he said it is “likely” this year due to the amount of uncertainty swirling through markets. Ed Yardeni, president of Yardeni Research, said in a Monday note that the S&P 500 is likely to retest its April 8 low and “probably find support there.” “If so, then the market may be forming a bottom,” Yardeni said. V-shaped recovery or sideways grind The last time the S&P 500 entered a correction was in 2023, when it fell from a peak on July 31 to a bottom on October 27. After hitting a bottom, the S&P 500 recovered swiftly in just 24 days. Adam Turnquist, chief technical strategist at LPL Financial, said he has been hesitant to call for a swift recovery this year. He said he has not seen the hallmark signs of a recovery, like investors shifting out of defensive stocks and into cyclical stocks. “It’s still very defensive right now, which gave us pause in terms of calling for any type of V-shaped recovery,” he said. “In terms of history, more often than not, you tend to retest the lows.” Turnquist said it seems like “peak fear” has passed, which could be a good sign for momentum. The CBOE Volatility Index, or Wall Street’s fear gauge, hit its highest level this year on April 8. CNN’s Fear and Greed index also slumped to its lowest level this year on April 8. “What comes next is a grind sideways as we need to build a base to begin the next leg up,” said Kim Abmeyer, a certified financial planner and founder of Abmeyer Wealth Management. Larry Tentarelli, founder of Blue Chip Daily Trend Report, said in a Wednesday note that the “key range levels” for the S&P 500 are 5,100 and 5,500. At Wednesday’s close, the index stood right in the middle at 5,375. “Whichever level breaks first on a closing basis will likely signal the next leg of this move,” Tentarelli said. There has also been pervasive bearish sentiment in the market, which can be a buying signal. The latest survey from the American Association of Individual Investors showed that for the past eight weeks, more than 50% of respondents have been bearish on the US stock market. Yet there are less optimistic signs, too. The S&P 500 on April 14 experienced what Wall Street calls a “death cross,” when the index’s 50-day moving average closed below its 200-day moving average. That can be a sign of more selling to come, according to Stovall. Markets reward patience It is incredibly difficult to pinpoint a market bottom in the midst of a slump. What matters for investors is being patient and having a plan, according to Yusuf Abugideiri, a certified financial planner and chief investment officer at Yeske Buie. “The patient, disciplined, policy-based investor ultimately is going to be rewarded over the long run,” Abugideiri said. “That’s the way the market makes you work for the returns. You’ve got to be patient; you’ve got to be disciplined.” Younger investors with long-term goals should see a market correction as a buying opportunity while stocks are on sale, he said. Meanwhile, if you are approaching retirement, diversifying your portfolio into more Treasuries and cash equivalents like money market funds can help protect your investments. While a variety of factors influence finding a bottom, Abugideiri said, the outlook for the market largely hinges on investors getting more clarity from the White House. “If investors get more clarity and have to deal with less uncertainty, markets are going to react favorably,” Abugideiri said.
Has the stock market hit bottom? History is a guide
TruthLens AI Suggested Headline:
"S&P 500 Struggles to Recover Amid Trade War Uncertainty"
CNN
7.4
TruthLens AI Summary
U.S. stocks experienced a surge on Wednesday, yet the S&P 500 index remains in a struggle to recover from the downturn triggered by President Donald Trump’s trade war. After reaching a record high in February, the S&P 500 faced a correction in March following the announcement of new tariffs by the administration. As of Wednesday, the index remains down 12.5% from its peak, reflecting a significant loss of $6.5 trillion in market value since February, according to Howard Silverblatt, a senior analyst at S&P Dow Jones Indices. Investors are left questioning when the market will find its bottom, with the S&P 500 hitting its lowest closing price of the year on April 8, down 18.9% from its peak. The historical context indicates that, on average, the S&P has taken about 133 days to reach a bottom after a correction, but this year’s rapid decline has raised doubts about whether the market will follow typical patterns. Experts suggest that the swift nature of the current correction could imply a shorter recovery period, although the ongoing uncertainty complicates predictions.
The potential for a retest of the April 8 low is highlighted by several analysts, who note that historical trends often see markets revisit previous lows before establishing a bottom. For instance, the S&P 500's behavior during the 1987 market crash is cited as a reference point for potential recovery patterns. Analysts emphasize the importance of shifting market sentiment, particularly regarding trade policies, as a determining factor for a sustained recovery. While some signs indicate that peak fear may have passed, caution remains prevalent among investors, as the market has displayed bearish tendencies. The general consensus suggests that patience, discipline, and a strategic investment approach are essential for navigating these turbulent times. Investors, especially those with long-term goals, are encouraged to view market corrections as opportunities to acquire undervalued stocks, while those nearing retirement might consider diversifying their portfolios to mitigate risks. Ultimately, the market's trajectory will significantly depend on the clarity of future policies from the White House, which could influence investor confidence and market stability.
TruthLens AI Analysis
The article outlines the current state of the US stock market, emphasizing the impact of President Donald Trump's trade war on stock performance. It highlights the S&P 500's decline from its peak earlier in the year and raises questions about when the market might hit its bottom. By referencing historical data, the article aims to provide context and insight into the potential recovery timeline for investors.
Market Sentiment and Investor Behavior
The article likely aims to instill a sense of cautious optimism among investors. By presenting historical averages regarding market corrections and recoveries, it suggests that the current downturn could be temporary. This could encourage investors to remain engaged rather than panicking and withdrawing from the market, which might lead to a self-fulfilling prophecy of further declines.
Transparency and Hidden Agendas
While the article presents data and historical context, it could be argued that it downplays or overlooks the broader implications of ongoing economic and geopolitical issues stemming from the trade war. This selective focus may lead readers to underestimate the complexities involved in the stock market's recovery, potentially masking the full economic landscape.
Credibility and Reliability
The article appears to be grounded in factual historical data and expert opinions, which lend it credibility. However, the interpretation of this data leans towards a more optimistic outlook, which may not fully represent the uncertainties surrounding the market. The reliance on averages from past corrections could lead to a false sense of security if current conditions differ significantly.
Historical Context
The reference to historical performance during past corrections serves as a powerful tool for shaping reader perceptions. By emphasizing that a faster recovery has occurred in the past, the article may engender a belief that the current situation will similarly resolve quickly. This narrative could be particularly appealing to retail investors looking for reassurance.
Implications for Stakeholders
The potential impact of this article on the stock market could be significant. If investors take its message to heart, it might encourage buying activity, which could help stabilize or even elevate stock prices. Sectors that are particularly sensitive to market fluctuations, such as technology or consumer goods, might see increased volatility as a result of this sentiment.
Investor Demographics
The article primarily targets individual investors and those with a vested interest in the stock market. It seeks to reach a demographic that may be anxious about the current state of the economy but still holds hope for recovery. This group may include retail investors who are less familiar with market dynamics and more influenced by media narratives.
Global Economic Context
In light of the ongoing global trade tensions and economic uncertainty, the article's focus on the US stock market reflects a broader narrative that can influence international perceptions of the US economy. This could have implications for foreign investment and economic policy decisions at a global scale.
Potential Influence of AI
While it is unclear if artificial intelligence was directly involved in writing this article, the structured presentation of data and historical context suggests that AI models designed for data analysis and report generation could have contributed. The use of AI might help in curating relevant historical data to support the article's narrative.
Manipulative Elements
The article could be perceived as having a manipulative undertone, particularly if it amplifies optimism without adequately addressing the risks involved. This could lead to unintended consequences, such as investors making hasty decisions based on an oversimplified view of the market.
The analysis indicates that while the article contains valuable insights and data, its optimistic framing may not fully capture the complexities and risks of the current market situation. This selective presentation could mislead readers about the potential for a swift recovery.