According to the Financial Association on March 18 (Editor: Huang Junzhi), following President Trump's "Tariff 2.0" which triggered a sharp decline in US stocks, top analysts on Wall Street indicated that they believe the "darkest moment" has passed and the stock market will show a more positive trend.

Recently, amidst concerns over President Trump's trade war and the prospects of a recession in the USA, US stocks have declined for four consecutive weeks. The S&P 500 Index even entered a technical correction range last Thursday, dropping over 10% from its historical high reached on February 19. By last Friday's close, the US stock market recorded its worst weekly performance in two years.

However, analysts from Morgan Stanley and Citigroup unanimously stated that the market may have already reached its bottom. Since this week, the three major US stock indices have risen for two consecutive days, continuing the rebound momentum from last Friday.

According to Morgan Stanley, there are five reasons for the rebound in the US stock market:

First, last week, major stock indices entered oversold territory. Last Thursday, the S&P 500 Index was trading around 5,500 points, at the lower end of the expected trading range for the first half of 2025 for this index.

Second, the sentiment and position indicators of the benchmark index have begun to "significantly relax," which is a sign of further upward movement.

Third, as we enter the second half of this month, the seasonal indicators seem to have improved.

Fourth, the recent weakening of the dollar, along with the growth in corporate sales in overseas markets, may trigger a wave of positive corporate earnings revisions.

Finally, this year's lower interest rates may help boost the USA's economic surprise index, which could also contribute to rising stock markets.

Mike Wilson, Chief Investment Officer of Morgan Stanley, wrote in the latest report on Monday: "We maintain last week's prediction that 5500 points should provide support for a rebound led by cyclical, low-quality, and expensive growth stocks, which have been hit the hardest and have the largest short base. The price movement on Friday seems to support this view."

Citi seems to agree. Analysts from the bank stated that the recent sell-off has made the valuation of the S&P 500 Index more healthy. Meanwhile, Citi indicated that the valuations of the Magnificent 7 appear to be more 'rational'. Currently, the Magnificent 7 accounts for about 9 percentage points of the total ROI of the S&P 500 Index, well below last year's peak.

The S&P 500 Index has also fallen 10% from its historical high in February. Citi analysts indicated that the decline in stock prices is balancing the risk-reward of stocks, making it 'upward'. They wrote: 'Over the past week, we have drawn the line at 5500 points, which is the level where the risk-reward starts to tilt in a more favorable direction.'

'In the long term, our fundamental view on the S&P 500 Index remains constructive, as factors such as improved productivity, AI prospects, operational leverage, shareholder influence, and the ongoing maturity of business models better describe our view on American exceptionalism.' They added.

Citi's optimistic forecast is noteworthy, as the bank recently also revised its outlook on the USA stock market, downgrading its rating for US stocks to 'neutral', while upgrading its rating for Chinese stocks to 'shareholding'.

Overall, analysts from Morgan Stanley and Citi have both set a year-end target price of 6500 points for the S&P 500 Index, which implies that the index could rise about 15% from its current level.

Editor/jayden