On August 19th, Caixin Media reported that after the epic sell-off known as 'Black Monday' this month, the US stock market gradually returned to normal last week, but is it over?

JP Morgan believes that this sudden sell-off (the biggest drop in the US stock market in two years) may herald future trends. Simply put, it is a 'rehearsal' for future events, because factors that drove the sell-off have not disappeared.

"Many market participants believe that the recent outbreak of various crowded trades is just a fluke or a flash crash, but we believe this is more like a rehearsal for future events." They wrote.

This month's market crash was caused by several unfavorable factors, which caused panic among investors: unexpected high unemployment triggered the Sahm Rule recession indicator; the Bank of Japan's interest rate hike triggered an epic sell-off in global stocks; the Federal Reserve was reluctant to cut interest rates; technology giants' massive investment in AI failed to produce returns, and more.

But with US retail data exceeding expectations and initial jobless claims falling to the lowest level since early July, the US stock market has started a "rally" and rose for seven consecutive days, not only regaining all the lost ground this month, but also seeing the largest weekly increase since the 'US stock market turnaround' at the end of October 2023.

Many Wall Street professionals are immersed in the current joy and have concluded that the 'frightening' continuous fall since August 1st is just an overreaction to short-term data fluctuations and nothing to be afraid of.

But JPMorgan emphasizes that there may be more sell-offs in the future. The bank pointed out that although many investors are still scared after the arbitrage trading burst this month and are unlikely to rush to adopt this strategy again, other factors are still lurking.

"We believe concerns about economic growth could be the next trigger." The bank wrote.

Warnings are everywhere.

In fact, there are many analysts who believe that the 'darkest moment' is not yet over, although the reasons they list are different.

Barry Bannister, chief stock strategist at Stifel, a well-known US investment bank, also called on investors to be cautious last week. He said that if the economy continues to slow down and eventually enters a recession, then the bear market is imminent with inflation staying high. He predicts that the S&P 500 index will fall to 5000 points by October.

Bannister warned that inflation will become a catalyst for further decline in the US stock market because it is 'more sticky' than people expected. He explained that the market thinks that a rate cut in September is almost a foregone conclusion, but by 2025, housing inflation will definitely rebound greatly, which will cause greater price pressures. He said: "This means that the Fed's 2% inflation target is just a pipe dream."

David Roche, chairman and global strategist of Independent Strategy, also expects the correction in the US stock market to continue. He predicts that due to factors such as smaller-than-expected interest rate cuts, slowing US economy and the AI bubble, there will be a bear market in the US stock market by 2025.

'I think these three factors are enough to cause a 20% drop in the US stock market in the bear market of 2025, possibly starting as early as the end of this year,' he said.

Editor/Emily