Amid recent fluctuations, the stock market is showing signs of a potential correction, according to experts. This follows a rebound after a significant selloff, with the S&P 500 just 3.6% shy of its all-time high, according to Benzinga Pro, despite a nearly 3% drop on Wednesday. This decline came after the Federal Reserve updated its inflation and interest rate outlook for 2025.
What Happened: The S&P 500 would need to fall to 5,481 to enter correction territory, which would represent a 10% drop from its peak. The last correction was noted in October 2023, as per Dow Jones Market Data. Despite the recent dip, the S&P 500 has risen 4.6% since Election Day, leading to high valuations, Barron's reported on Friday.
John Bartleman, CEO of TradeStation, suggests that a correction could be beneficial, potentially curbing excessive market exuberance.
"A correction is likely. But there are still a couple of years left in this bull market," he said.
Nancy Curtin, CIO at AlTi Tiedemann Global, views a correction as a potential buying opportunity. Meanwhile, Bret Kenwell of eToro points out that mild inflation and strong earnings forecasts for 2025 could bolster future market growth.
Analysts are forecasting a 15% increase in S&P 500 profits next year, followed by another 13% rise in 2026. Lule Demmissie of Apex Fintech Solutions considers the current pullback as healthy, emphasizing the robust U.S. economy and sustained investor interest in tech stocks.
Why It Matters: The potential for a market correction is underscored by concerns over U.S. economic growth and corporate earnings.
Wharton's Jeremy Siegel also called the stock selloff in recent days a "healthy" reaction to the Federal Reserve's cautious approach regarding interest rate cuts the future.
Brian Arcese of Foord Asset Management has highlighted these issues as potential catalysts for a correction. Arcese notes that the S&P 500 has been "expensive for quite a while," with a price-to-earnings ratio exceeding 27. He suggests that a correction would be healthy, but it would require a catalyst, such as slowing economic growth or rising inflation, to occur.
Price Action: According to Benzinga Pro, the SPDR S&P 500 ETF Trust (NYSE:SPY) was down by 1.06% while Invesco QQQ Trust, Series 1 (NASDAQ:QQQ) was down by 1.24%.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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