Wall Street Sees Signs That the US Stock Selloff Could Be Approaching Its End -

Investors who have faced one of the fastest declines in US stock prices may soon find themselves on the path to recovery.

Equity analysts from leading firms like JPMorgan Chase & Co, Morgan Stanley, and Evercore ISI suggest that the toughest phase of the recent downturn seems to be behind us, citing various indicators of investor sentiment, market positioning, and favorable seasonal trends.

On Monday, major US stock indices saw a rebound following news that President Donald Trump plans to adopt a more cautious approach concerning tariffs due to take effect on April 2. This eased some concerns that his escalating trade conflict could spark inflation and slow economic growth.

These worries—together with ongoing fears that the AI-fueled rally among Big Tech firms had reached its zenith—contributed to a notable decline in stock prices since mid-February. This downturn pushed the S&P 500 Index into its seventh-fastest 10% drop from an all-time high in nearly a century, erasing over $5.6 trillion from the market value of the index, as reported by Bloomberg.

According to JPMorgan, much of this decrease was attributed to a group of momentum stocks—the 50 companies exhibiting the strongest performance in the S&P 500—which had their two years of gains wiped out within just three weeks. However, this selloff alleviated some of the overcrowding that had built up in that sector during the previous rally.

“As a result, the chances of another drastic market pullback in the near term are minimal,” observed JPMorgan strategists, led by Dubravko Lakos-Bujas, in a communication to clients on March 21.

Market segments that were previously affected the most saw the largest rebounds on Monday. A measure of the so-called Magnificent Seven stocks surged by 3.4%. Tesla soared 12%, marking its biggest one-day gain since November 6, post-Election Day. Overall, the S&P 500 index increased by 1.8%.

Morgan Stanley’s Michael Wilson echoed Lakos-Bujas’s optimistic view, noting that seasonal trends, a decreasing US dollar, and Treasury yields, along with extremely negative investor sentiment, are paving the way for a “trading rally in the near future.” At Evercore ISI, Chief Equity and Quantitative Strategist Julian Emanuel remarked that the Trump administration’s economic remarks have “reset expectations to such an extent that sentiment is currently quite negative.”

“We believe that the corrective phase we’ve gone through is resolving, likely leading to considerable gains in the near term,” he said.

The recent market decline has left Wall Street split over whether it’s the right time to buy the dip, with uncertainties regarding trade policy and inflated tech valuations still posing concerns. While analysts predict a period of stability ahead, they are cautious about advising heavy investments in US equities right now.

This cautious approach is primarily due to Trump’s forthcoming announcement of universal, reciprocal trade tariffs next month, which could again alter investor expectations regarding the potential economic impact.

Emanuel from Evercore stated that this will act as the next market catalyst. Morgan Stanley’s Wilson is also keeping an eye on employment and manufacturing data, alongside earnings revisions, as indicators for a more sustainable rally.

Chief Market Strategist and President of 22V Research, Dennis DeBusschere, noted on Monday that the internal dynamics of the market have improved, suggesting that the US economy is not heading toward a recession. The unusually low investor sentiment, given still strong economic data, hints at “stronger than normal returns” over the next one, three, and six months if the tariff impacts are minimal. However, like his colleagues, he is awaiting more clarity regarding the tariffs before solidifying his outlook.

“If tariffs do not present a significant barrier to growth, fundamental indicators should recover throughout 2025,” he added. Nonetheless, “we are not very confident that tariffs will not lead to severely negative consequences, which is why we will wait for the April 2 announcement before confirming this long-term perspective.”

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