Experts warn the market hasn't bottomed out yet
- Rebecca Cheong of UBS has indicated that the stock market has not yet found its bottom despite recent recoveries.
- The current decline is noted as the fourth sell-off in the S&P 500 greater than 15% since 2018, driven primarily by tariff-related concerns.
- Cheong concludes that further declines and market instability are expected before a true recovery can take place.
In the United States on April 22, 2025, Rebecca Cheong, the head of Americas equity derivatives strategy at UBS, issued a cautionary note to clients regarding the stock market's trajectory. Despite a recovery from recent losses related to President Donald Trump's implementation of high tariffs on imports, Cheong asserts that the ultimate signal of market bottoming has not been achieved. She emphasizes that previous significant sell-offs were followed by marked intraday recoveries driven by high-volume buying, which she believes has not occurred this time. Cheong pointed out that the latest downturn in the S&P 500 marks the fourth time since 2018 that the index has experienced a decline exceeding 15%. What sets this current situation apart is the lack of critical buying activity during recent trading sessions. The sell-off initiated by Trump's tariff plans, which included a 90-day pause on certain tariffs, saw a rebound in speculative buying without the conviction usually seen at market bottoms. Cheong noted this rebound failed to meet the criteria typically seen during market recoveries. Trading patterns observed are said to signal that the market is still experiencing excess pressure from short sellers and insufficient buying to indicate a sustainable recovery. Cheong has noted the trading volume was significantly lighter than average, indicating a lack of genuine bullish sentiment among investors. The absence of typical capitulative buying leads her to believe that the sell-off and subsequent rebound were artificially fueled rather than indicative of a market bottom. Consequently, Cheong warns that further decline and pain are likely before the market can stabilize. The sentiment surrounding the current market environment reflects investor uncertainty, and Cheong suggests caution moving forward as the dynamics of the market continue to unfold unpredictably. With implications for both institutional and individual investors, her insights urge market participants to remain vigilant and prepared for continued volatility.