This positive outlook comes amidst shifting economic conditions and global uncertainties. Experts anticipate a potential upturn in stock performance, providing new opportunities for investors to capitalize on the market's recovery.
According to Piper Sandler, a solid rebound could be on the horizon for U.S. stocks following a period of intense volatility. Craig Johnson, the chief market technician at the firm, noted that the S & P 500 closed in oversold territory on Tuesday, with its relative strength index dropping to 28.3. This indicates that the asset may be due for a recovery, with Johnson projecting a potential relief rally of 3% to 5% in the near future.
Oversold Territory Signals Opportunity
Craig Johnson, the chief market technician at Piper Sandler, noted that the S & P 500 closed Tuesday's session in oversold territory with a relative strength index reading of 28.3. The recent pressure on the S & P 500 has been attributed to escalating trade tensions between the U.S. and key partners, leading to concerns about a possible recession
Tariffs imposed on imports from Mexico, Canada, and China, as well as retaliatory measures taken by these countries, have contributed to the market unease. The benchmark index briefly entered correction territory on Tuesday, falling over 10% from its February record high, and is currently down around 3% for the week.
Expectations of Relief Rally
Johnson anticipates a relief rally of 3% to 5% in the near future, signaling a potential turnaround for the market. Despite the current pessimism among investors, there are signs that a sentiment reversal may be imminent. Ned Davis Research also suggests that stocks could be poised for a rebound as extreme pessimism reaches its peak. Tim Hayes, the firm's chief global investment strategist, highlighted the potential for equities to start recovering as fears are proven to be unfounded, signaling a buy opportunity in the market.
Trade Tensions Contribute to Market Pressure
The recent escalation of trade tensions between the U.S. and key partners has weighed heavily on the market, impacting consumer sentiment and fueling concerns about a looming recession.
Correction Territory and Market Response
The S & P 500 briefly entered correction territory on Tuesday, experiencing a decline of over 10% from its previous high in February. Despite this, the market saw a modest rise on Wednesday following the release of U.S. inflation data.
Expert Perspectives on Market Sentiment
According to Ned Davis Research, investor pessimism has reached extreme levels, indicating a potential for sentiment reversal and a subsequent market rebound. A recent analysis by Piper Sandler suggests that U.S. stocks could be primed for a solid rebound following a period of significant volatility.
Final Thoughts on Market Outlook
Tim Hayes, the chief global investment strategist at Ned Davis Research, suggests that a shift from extreme pessimism to a more optimistic outlook could trigger a buy signal and lead to a recovery in equities.
