logo
Has the stock market's epic rebound come too far, too fast? What investors chasing the rally should keep in mind.

Has the stock market's epic rebound come too far, too fast? What investors chasing the rally should keep in mind.

Yahoo16-05-2025

Any investor who was bold enough to buy the dip in stocks last month has been quickly rewarded. But has the stock market's comeback been too much, too fast?
Some on Wall Street think so.
I have $50,000 in credit-card debt after my divorce, but received $30,000 after a car wreck. Do I buy a used Lexus?
My second wife says her 2 kids should inherit our estate, but I also have 2 kids. Is that fair?
My husband and I spend more money on our daughter and her family than on my single son. Do we compensate him?
These $5,000 bonds can help you fix a stock-heavy portfolio
'I am scared to death that I'll run out of money': My wife and I are in our 50s and have $4.4 million. Can we retire early?
'I think what we're seeing now is emotion and people chasing the rally, and this fear of missing out,' said Michael O'Rourke, chief market strategist at Jones Trading, during an interview with MarketWatch.
Since its closing low on April 8, the S&P 500 SPX has risen by more than 17% through Tuesday's close, a pace rarely seen over the past 75 years. Analysts at Birinyi Associates have found six examples since 1950 where short-term returns for the S&P 500 were on par with what investors have seen over the past six weeks.
Following each example, returns 12 months later were almost universally strong. The strongest example followed the COVID-19-inspired meltdown in early 2020: Following the market's initial comeback, the S&P 500 continued to climb, ultimately tacking on a 46% return 12 months later.
But a lot can happen in a year, and there are still plenty of investors out there who expect stocks could head lower once again in the interim. Even Wall Street luminaries like Paul Tudor Jones have said that they expect the market will revisit its April lows later this year as the economic damage from Trump's tariffs is finally felt.
See: Paul Tudor Jones says U.S. stocks will fall to new lows — even if Trump dramatically dials back China tariffs
Mark Hackett, chief market strategist at Nationwide, pointed out that U.S. stocks are still expensive compared with companies' expected earnings over the next 12 months.
'The market has raced from oversold to overbought in record time, with the S&P 500 now trading at 21x forward earnings,' Hackett said in emailed commentary.
The relative strength index for the S&P 500, a popular stock-market momentum gauge, was sitting north of 70 on Wednesday, putting the index squarely in overbought territory. It had fallen below 30 as recently as April 4, before Trump announced his initial 90-day pause on global tariffs.
To be sure, investors inclined to keep on buying have plenty of grist to support their thesis. Trump has walked back many of his most economically damaging tariffs, and few expect the administration will bring them back — at least not at the levels announced on April 2.
At the same time, many hedge funds and other institutional investors who either sold stocks in April or sat things out are likely facing pressure to chase the rally.
Trade deals with the U.K. and China have shown that the White House is serious about finding an off-ramp. After unveiling the 90-day pause followed by a dramatic de-escalation of its China tariffs this week, the U.S. effective tariff rate has fallen to 14.4%, compared with nearly 24% just before, according to data from J.P. Morgan. To be sure, even 14.4% is higher than where tariffs stood at the beginning of 2025.
Adding to the sense of optimism, much of the hard economic data released so far have shown little indication that the tariffs, and the attendant surge in policy uncertainty caused by their chaotic rollout, have caused any deeper damage to the American labor market or consumers' willingness to spend.
But plenty of data from April has yet to be released, and some expect the full extent of the economic blowback could take longer to play out.
'There has likely been damage done, especially to smaller businesses, that it will be difficult to recover from, at least in the short term,' said Melissa Brown, managing director of investment-decision research at SimCorp.
There are still plenty of unanswered questions surrounding the White House's tariff agenda that could upend stocks. After rampant speculation about whether the 'Trump put' was still in play, the administration has shown once again that it is responsive to pressure from the financial markets, be it stocks or bonds.
See: Stock-market recovery suggests equities must fall this far to spark a 'Trump put' or pivot
Trump's plans for national-security tariffs on semiconductors and pharmaceuticals remain a key unanswered question for investors. The administration has been largely quiet regarding its plans lately, although the Commerce Department was asked to begin a formal investigation at the beginning of April, Jones Trading's O'Rourke noted. If the White House follows through with substantial levies intended to encourage the reshoring of production related to sensitive goods, it could send stocks reeling once again.
The confusion here helps underscore a key risk for stocks: The fact that with one Truth Social post, Trump could send investors scrambling out of equities once again.
O'Rourke, however, said he is beginning to suspect that last month's market chaos may have caused the president to lose his nerve on his tariff agenda.
'Did the president get so spooked on the reaction to his China tariffs that he doesn't follow through here?' O'Rourke wondered.
Then there's the question of the bond market. The yield on the 10-year Treasury note BX:TMUBMUSD10Y quietly crept back above 4.50% on Wednesday, returning to levels seen last month that spooked fears of a bond-market meltdown and helped encourage Trump to announce the 90-day pause on many of his 'liberation day' levies. Bond prices move inversely to bond yields, falling as yields rise.
'Yields on the long end are rising, that's going to be our ultimate battle now,' said George Cipolloni, a portfolio manager at Penn Mutual Asset Management.
U.S. stocks traded mostly higher on Wednesday, with the S&P 500 up marginally while the Nasdaq Composite COMP ended on solid gains. The Dow Jones Industrial Average DJIA and the Russell 2000 RUT both closed lower.
Wall Street's biggest bull held his nerve throughout this year's selloff. What he's saying now.
'I'm flabbergasted': My friend wants to borrow $5,800 to save his home from foreclosure. What should I do?
Has the stock market's epic rebound come too far, too fast? What investors chasing the rally should keep in mind.
'We live modestly': My wife and I have $900K in stocks and $380K in savings and CDs. Are we holding too much cash?
Wall Street's fear gauge just dropped with striking speed. What historically comes next for stocks?

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Trade war: US-China talks in London aim for widespread truce
Trade war: US-China talks in London aim for widespread truce

Yahoo

time19 minutes ago

  • Yahoo

Trade war: US-China talks in London aim for widespread truce

Top US and Chinese officials are meeting in London on Monday in the hope of making further progress in easing the trade war between the world's two largest economies. The eyes of global financial market investors are firmly on the outcome of the discussions, given the damage already inflicted by the spat and wider US-led trade war. The US delegation is led by Treasury secretary Scott Bessent while China's vice premier He Lifeng - a respected negotiator at the top of the Chinese government - will represent his country. The venue has not been disclosed. Money latest: It is hoped the talks will build on the preliminary agreement struck in Geneva that removed the effective trade embargo between the two nations. That deal amounted to a 90-day reduction in effective tariff rates above 100% to allow for further talks. A phone conversation between Donald Trump and his Chinese counterpart Xi Jinping last week set the scene for Monday's negotiations. Mr Trump later said that Xi had agreed to resume shipments to the US of rare earths minerals and magnets. They had been suspended by Beijing in response to Mr Trump's tariffs and were seen as an effective tool in getting the US to talk due to the havoc it inflicted on supply chains central to many American manufacturers - the very sector the US president is trying to bolster through his "America first" agenda. It emerged on Monday morning that Boeing had resumed shipments of planes to Chinese customers. Mr Trump has described the status of the negotiations as "very far advanced" but China, in its own remarks, has been more critical of the US position. A Chinese government readout of the Trump-Xi conversation said the Chinese premier had told his US counterpart to back down from inflicting further hurt to the global economy. The trade war to date has damaged growth widely, with official US figures showing a sharp slowdown in the first quarter of the year - before the worst of the tariff regime had even been announced. Data out of China on Monday showed deflationary pressures had deepened as factory gate prices - an important signal on future price growth - slid further into negative territory during May as demand for goods continued to drag. Customs data had already showed that China's exports to the US - its biggest single market - slumped by 34.5% year-on-year during May in value terms. That was up from a 21% drop the previous month. Read more:Diplomatic win for UK by hosting US-China talks White House spokeswoman Karoline Leavitt told Fox News: "We want China and the United States to continue moving forward with the agreement that was struck in Geneva. "The administration has been monitoring China's compliance with the deal, and we hope that this will move forward to have more comprehensive trade talks." A UK government spokesperson said of hosting the negotiations: "We are a nation that champions free trade and have always been clear that a trade war is in nobody's interests, so we welcome these talks."

J. M. Smucker (SJM) Q1 Earnings Report Preview: What To Look For
J. M. Smucker (SJM) Q1 Earnings Report Preview: What To Look For

Yahoo

time25 minutes ago

  • Yahoo

J. M. Smucker (SJM) Q1 Earnings Report Preview: What To Look For

Packaged foods company J.M Smucker (NYSE:SJM) will be announcing earnings results tomorrow before market open. Here's what to look for. J. M. Smucker missed analysts' revenue expectations by 1.7% last quarter, reporting revenues of $2.19 billion, down 1.9% year on year. It was a mixed quarter for the company, with an impressive beat of analysts' gross margin estimates but a miss of analysts' organic revenue estimates. Is J. M. Smucker a buy or sell going into earnings? Read our full analysis here, it's free. This quarter, analysts are expecting J. M. Smucker's revenue to be flat year on year at $2.19 billion, in line with the 1.3% decrease it recorded in the same quarter last year. Adjusted earnings are expected to come in at $2.25 per share. Analysts covering the company have generally reconfirmed their estimates over the last 30 days, suggesting they anticipate the business to stay the course heading into earnings. J. M. Smucker has missed Wall Street's revenue estimates six times over the last two years. Looking at J. M. Smucker's peers in the shelf-stable food segment, some have already reported their Q1 results, giving us a hint as to what we can expect. SunOpta delivered year-on-year revenue growth of 9.3%, beating analysts' expectations by 3.7%, and TreeHouse Foods reported a revenue decline of 3.6%, in line with consensus estimates. SunOpta traded up 28.3% following the results while TreeHouse Foods was down 8.3%. Read our full analysis of SunOpta's results here and TreeHouse Foods's results here. Investors in the shelf-stable food segment have had steady hands going into earnings, with share prices flat over the last month. J. M. Smucker's stock price was unchanged during the same time and is heading into earnings with an average analyst price target of $121.36 (compared to the current share price of $111.50). Today's young investors likely haven't read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store