Despite the stock exchange recovery after the customs shock, an expert warns: optimism could be – and the most difficult phase may still be imminent.
• Stock market recovery leads to optimism for investors
• Expert sees a warning signal in this
• Another correction could follow soon
The stock markets have largely recovered from the effects of tariffs in the past few weeks. But this upswing could be deceptive: an expert warns that the worst times could still be imminent. Because with the price increase, investor optimism has also increased rapidly.
However, according to an analysis by Marketwatch columnist Mark Hulbert, the recent increase in optimism is worrying. “Many on Wall Street behave as if the worst of the market fluctuations caused by tariffs are now lying behind us. However, this is a bad omen from a contrary point of view, since the market likes to climb a so -called ‘Wall of Worry’ – and the wall, which existed a few weeks ago, is now crumbling,” said Hulbert.
After a customs shock on the stock market: expert warns of dangerous euphoria
“The normal reaction of investors to a correction is more caution, nothing less,” continued the analyst. Because, according to experts, a correction that investors is more aware of the risks that face them in the future. Even if the market reaches the old level again after such a phase, investors are usually more careful. But in this case the picture seems to change.
On Friday, May 2, the S&P 500 reached a higher level level than before the tariff-related market fluctuation on April 2, and yet the atmosphere on Wall Street is much more positive. According to Hulbert, the current recovery could turn out to be too optimistic if the investors do not exercise enough caution.
Between fear and greed: Sentiment indices indicate the reset
As Hulbert reports on Marketwatch, this increase in optimism can also be measured using various sentiment indices. The average share of shares in short -term market participants according to Hulbert Stock Newsletter Sentiment Index on May 2 was 25 percentage points higher than on April 2. The increase among the market teachers who concentrate on the Nasdaq is particularly striking. According to Hulbert Nasdaq newsletter, the difference was even 64 percentage points here.
Another example of the increasing optimism is the Fear and Greed Index of CNN, which classifies the mood on the market on a spectrum between fear and greed. On May 2, this index was significantly higher than on April 2 and even above the value of February 19 – the day of the all -time high of the S&P 500.
“If this were the beginning of a new bull market that could drive the broad market indices to new all -time highs, we would expect that the rally will be recorded with more skepticism for the past three weeks. Since this is not the case, contradictions expect the rally soon,” said the financial expert.
Do investors have to fear an early decline into the correction zone?
These warning signals do not necessarily mean that a bear market is imminent. According to Hulbert, a possible scenario could be that the market will return to the correctional root – but not to the bear market. The associated increased caution can lead to a so -called “Wall of Worry” that could support an upswing to new highs.
“However, contrary prefer not to speculate, but to let the market tell the market at its own pace. And for the moment, the moral of this story is that caution is a virtue,” emphasized the market analyst.
Editor finance.net
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