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- History says buying the stock market dip will pay off as fear turns into greed (businessinsider.com)
Market Turmoil Expected to Ease, History Suggests Rebound
Despite the recent market downturn, fueled by escalating trade tensions and fears of a recession, historical data suggests a potential rebound could be on the horizon. While the S&P 500 experienced its fourth-worst two-day decline in four decades, past data analyzed by firms like BMO Capital Markets reveals an average 36.3% market gain in the 12 months following similar crashes.
Truist’s chief market strategist, Keith Lerner, echoes this optimism. He notes that previous downturns saw stock rebounds between 9% and 15% within just twelve trading days.
Lerner advises against panic selling, emphasizing the rapid shifts between fear and greed that drive market volatility. He suggests the current sell-off may slow in the coming weeks, citing research on market responses to similar situations.
While acknowledging the possibility of a recession, Lerner points out that the S&P 500’s current 19% drop from its high suggests the market may already be pricing in a significant chance of a downturn. He believes that while a full recovery to previous highs is unlikely in the short term, the current market conditions present a buying opportunity rather than a time for further selling. Lerner emphasizes the current market prices reflect some uncertainty compared to the potentially riskier period of late February when such concerns weren’t factored in.
With the market having retraced 50% of its gains since late 2022, a significant technical support level, Lerner anticipates a potential countertrend rally. While the duration of such a rally remains uncertain, it could offer a welcome reprieve from the recent persistent selling pressure.
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- History says buying the stock market dip will pay off as fear turns into greed (businessinsider.com)