The recent market slump has investors on edge, with the S&P 500 falling 8% since mid-February. Morgan Stanley suggests the index could find support at the 5,500 level, about 2% below Monday’s close. Key factors driving the downturn include tariff concerns, fiscal policy drags, and a strong dollar.
From the @WSJ article, “The Week the Smart Money Got Whipsawed by the Market: Hedge funds usually like to take advantage of stock-market unrest. Lately, they have helped spread it instead.”#markets pic.twitter.com/SFYAtfBcVe
— Mohamed A. El-Erian (@elerianm) March 15, 2025
Washington’s inconsistent tariff policies have spurred fears of higher inflation, adding to investor anxiety. Immigration enforcement and budget cuts are also seen as pressures weighing on earnings. Amid these challenges, risk-averse investors have turned to bonds and gold.
What a few weeks for the US stock market.
With today’s decline, the S&P ended the trading session in correction territory.
The speed of the correction is eye popping. It only took the index three weeks to fall 10%.#markets #stocks #investing #investors pic.twitter.com/GukL4umnfq— Mohamed A. El-Erian (@elerianm) March 13, 2025
S&P 500 turned higher at the 61.8% retracement of the August lows/Feb peak and above the July/Sept trendline.
Coupled with the likelihood of better seasonals after mid-March and we could have the first small bit of good news in weeks. pic.twitter.com/nNhrN6XAio
— Ryan Detrick, CMT (@RyanDetrick) March 14, 2025
Looking ahead, Morgan Stanley forecasts the S&P 500 could reach 6,500 by the end of 2025, although the journey will likely be turbulent. In a worst-case scenario where growth sharply declines and recession looms, the S&P 500 could drop to their bear case target of 4,600. Wall Street’s confidence in Corporate America’s profit engine is fraying.
Can stocks really bottom the day they move into a correction (based on closing 10% off of ATHs)?
Turns out they can, as it happened on: 3/5/1968, 1/30/1990, 10/27/1997, and 2/8/2018.
Will 3/13/2025 be added to this list? pic.twitter.com/6uxe9bxlZH
— Ryan Detrick, CMT (@RyanDetrick) March 14, 2025
Profit forecasts for S&P 500 companies have seen more downgrades than upgrades for 22 of the past 23 weeks, according to Bloomberg Intelligence, the longest stretch since early 2023. Some US companies are already sending worrying signals. American Airlines Group Inc.
S&P 500’s turbulent market outlook
predicted its first-quarter loss would be roughly twice as big as expected, while retailers including Kohl’s Corp., Abercrombie & Fitch Co., and Walmart Inc. have sounded a cautious note.
Analysts still see a 10% advance in S&P 500 earnings in 2025, down from a 13% forecast in early January. However, there may be ample room on the downside. Yung-Yu Ma, chief investment officer at BMO Wealth Management, said analysts will likely need to trim their annual S&P 500 profit estimates for 2025 to the high single-digits to account for the restraint tariffs would put on corporate profit margins.
U.S. stocks could fall sharply over the coming months if risks materialize, according to Morgan Stanley’s Michael Wilson. He sees a “volatile” path to his 6,500-point end-of-year price target for the benchmark, as the market continues to contemplate these growth risks. Should the economy move toward recession, Wilson warned that stocks could fall another 20% from current levels.
U.S. jobs cuts have reached a 16-year high as trade war concerns hammer sentiment. In a weekend interview with Fox News, President Donald Trump refused to rule out the chance of a recession and defended his on-again-off-again tariff rollout as necessary in his effort to rebalance the economy. HSBC analysts lowered their rating on U.S. equities to neutral, citing “better opportunities elsewhere for now” amid the trade and economic uncertainty.
JP Morgan analysts suggest that stocks are set for a relief rally over the coming days but urge investors to sell into those gains as economic risks accelerate.
