It’s very difficult to know if we’re at or close to a market bottom. They rarely occur over the space of weeks – it generally takes months. But I cannot predict when (or what) the bottom will be. However, I think the ~20% correction from the market high (6147) to the low (4834) tells me a large portion of the selling is behind us. For example, we’re now starting to see equity exposure significantly reduced and cash levels raised. This is a good sign… as there are a lot less people to sell.
S&P500
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‘Trump Dump’ Offers Opportunity
It’s official… the stock market is now ‘on sale’. Panic selling has set in with the VIX trading above 45 – something we have only seen 7 times over the past 25 years. For those who resisted chasing extreme valuations the past 12 months – your patience has been rewarded. Valuations have come down. In turn, the longer-term risk reward is now more attractive than what it was only a couple of months ago. But these are rare times. For e.g., it was the only third time this decade that the S&P 500 shed more than 10% in two days.
Downside Unlikely Over
From the moment Trump announced his blanket 10% tariffs in addition to so-called “reciprocal levies” – it’s been an exodus from risk assets. The selling was immediate and sharp – something we’ve not seen since the pandemic five years ago. However, as I will demonstrate, there could be more to come. And from mine – further sharp selling could set up a great buying opportunity for long-term investors.