Usually, when market sentiment towards the USA stock market becomes so gloomy, volatility increases, and analysts significantly lower return expectations, it indicates that risk-tolerant investors will rush into the market. However, Wall Street warns that due to the uncertainty of tariff policies and economic data, the aforementioned strategy is not applicable.
According to Zhiyun Finance APP, usually when the market's sentiment towards the USA stock market becomes extremely pessimistic, volatility increases, and Analysts significantly lower their ROI expectations, it means that risk-taking investors will rush into the market. However, Wall Street insiders warn that due to uncertainties in tariff policies and economic data, the aforementioned strategy does not apply.
For HSBC Holdings' Chief Multi-Asset Strategist Max Kettner, this is the first time in many years that he has set aside the positions and sentiment indicators he usually focuses on and underestimated the likelihood of a rebound.
Kettner stated, "I advise clients to ignore such signals at the current moment, as policy uncertainty remains very high and is unlikely to dissipate anytime soon."
Investors have to face a new reality: the usually reliable Buy Indicators have been disrupted by the White House's erratic policy statements, making it nearly impossible to predict the next movements of the stock market.
"Buy" signals are flashing.
To some extent, investor sentiment is extremely pessimistic, which often provides opportunities for bargain buyers.
A survey by the American Association of Individual Investors, which has garnered much attention, shows that the Put sentiment indicators have reached 50% or above for nine consecutive weeks, setting a record. Since 1987, there have only been three times when market sentiment was this poor, with subsequent stock market performance being mixed.
The S&P 500 Index remains in a state of uncertainty.
Paul Hickey, co-founder of Bespoke Investment Group, stated: "During this period, the situation has worsened. Investors still feel concerned today, as a weak economy seems to be a foregone conclusion."
Michael Hartnett and the Bank of America strategists believe that the recent rise is a painful Trade that will push the stock market higher. They advise clients to sell on rallies and warn that the conditions for a sustained increase are not yet in place, as recession and inflation risks intensify, potentially prompting investors to withdraw from the US stock market.
A recent survey by Bank of America found that fund managers are "extremely pessimistic" about the macro environment—this pessimism historically foreshadows a reversal in the stock market. However, based on fund managers' portfolio allocation, they are "not completely bearish on the market," which suggests that there is still room for further declines in the stock market.
Buy signals are stronger. BMO Capital Markets states that negative earnings revisions have been a reliable leading indicator of past stock market advances, and other similar indicators include investors' pessimistic expectations, falling PE ratios, and risk-averse sentiment triggered by rising volatility. The company estimates that historically, these indicators signal an average ROI of at least 10% in the coming year.
Wall Street remains skeptical.
Currently, despite retail investors continuing to Buy, Wall Street remains skeptical. According to the funds flow monitored by Deutsche Bank, Institutional investors are generally maintaining a Neutral stance towards the market because they are "still caught between escalating macro concerns and potential Trade tensions easing."
Before the White House makes a more definitive statement, the US stock market will be trapped in a troubling state of uncertainty.
Dave Mazza, CEO of Roundhill Investments, stated: "You have to figure out how to incorporate tariffs into pricing, which is nearly impossible—if companies cannot model it, how can investors predict it?"
He also stated: "The ratio of Put Options to Call Options, the proportion of Stocks at 52-week lows and other Indicators do not suggest 'Buy'. Therefore, market conditions are mixed, and the bottom remains difficult to determine."
Editor/rice
