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CNN
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US stocks soared Wednesday, but the S&P 500 is still trying to climb out of slump instigated by President Donald Trump’s trade war.
After hitting a record high in February, the S&P 500 dropped into correction in March as Trump unveiled his plan for tariffs. The benchmark index as of Wednesday was still down 12.5% from its peak two months ago. (A 10% decline from a peak is considered a correction. A 20% decline from a peak is considered a bear market).
The market has shed $6.5 trillion since its record high in February, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
As stocks have gyrated, investors are wondering when the market might find a bottom.
The truth is: No one can know for sure.
The market hit its lowest closing price this year on April 8, down 18.9% from its February peak. The S&P 500 has yet to test that low again, and it’s anyone’s guess whether the market continues climbing higher.
While uncertainty is rife, history can serve as a guide as to when the the S&P 500 might find a bottom.
Four months to bottom, historically
The S&P has had 24 corrections since the end of World War II, according to Sam Stovall, chief investment strategist at CFRA Research. Historically, when the S&P entered correction but did not enter a bear market, it took the index an average of 133 days to find a bottom, and an average of 113 days to recover.
If April 8 turns out to be the market’s bottom, it would be just 48 days from February’s peak to bottom — much faster than the historical average.
Additionally, it has historically taken the S&P 500 an average of 77 days to go from a peak to confirming a correction, according to Stovall. This year, it took the benchmark index just 22 days to confirm a correction (a peak on February 19 to a correction on March 13), which is also much faster than the historical average.
Typically, when there is a sharp decline from a peak to correction, the slump tends to be relatively short before the market recovers, according to Stovall.
“Swift declines tend to be shallow and short-lived,” he said. “History is a great guide, but it’s never gospel, so we’ll have to wait and see whether that will hold true.”
And vast uncertainty looms. The market correction this year has been driven by the White House’s policy, Stovall said, which is historically rare.
“The only problem is that this is what I call a manufactured correction, meaning that it started because Trump initiated a trade war,” he said. “It is because of what the current administration is doing.”
Retesting the low and 1987
The S&P 500’s closing price on April 8 was 4,982.77. Some Wall Street analysts expect the market to “retest” that low before finding a bottom.
“In order for the April 8th lows to hold, investors must see enough of a trade policy shift to give them hope that the worst has passed,” said Nick Colas, co-founder of DataTrek Research, in a Monday note.
Colas noted that “modern market lore” about retesting lows can go back to the 1987 market crash. On October 19, 1987, The S&P 500 plummeted 20.5% before rebounding about 14% across the next two days. Yet the benchmark index struggled to hold onto those gains and eventually retested its October low point in December. Despite briefly falling below the October low, the December retest turned out to be the bottom.
“Then … the index rallied 10.3% through year end,” Colas said. “Investors saw that as an ‘all clear’ sign, and the S&P went on to gain 16.5% in 1988.”
Colas noted that not every market slump historically needed to retest its low, though he said it is “likely” this year due to the amount of uncertainty swirling through markets.
Ed Yardeni, president of Yardeni Research, said in a Monday note that the S&P 500 is likely to retest its April 8 low and “probably find support there.”
“If so, then the market may be forming a bottom,” Yardeni said.
V-shaped recovery or sideways grind
The last time the S&P 500 entered a correction was in 2023, when it fell from a peak on July 31 to a bottom on October 27. After hitting a bottom, the S&P 500 recovered swiftly in just 24 days.
Adam Turnquist, chief technical strategist at LPL Financial, said he has been hesitant to call for a swift recovery this year. He said he has not seen the hallmark signs of a recovery, like investors shifting out of defensive stocks and into cyclical stocks.
“It’s still very defensive right now, which gave us pause in terms of calling for any type of V-shaped recovery,” he said. “In terms of history, more often than not, you tend to retest the lows.”
Turnquist said it seems like “peak fear” has passed, which could be a good sign for momentum. The CBOE Volatility Index, or Wall Street’s fear gauge, hit its highest level this year on April 8. CNN’s Fear and Greed index also slumped to its lowest level this year on April 8.
“What comes next is a grind sideways as we need to build a base to begin the next leg up,” said Kim Abmeyer, a certified financial planner and founder of Abmeyer Wealth Management.
Larry Tentarelli, founder of Blue Chip Daily Trend Report, said in a Wednesday note that the “key range levels” for the S&P 500 are 5,100 and 5,500. At Wednesday’s close, the index stood right in the middle at 5,375.
“Whichever level breaks first on a closing basis will likely signal the next leg of this move,” Tentarelli said.
There has also been pervasive bearish sentiment in the market, which can be a buying signal. The latest survey from the American Association of Individual Investors showed that for the past eight weeks, more than 50% of respondents have been bearish on the US stock market.
Yet there are less optimistic signs, too. The S&P 500 on April 14 experienced what Wall Street calls a “death cross,” when the index’s 50-day moving average closed below its 200-day moving average. That can be a sign of more selling to come, according to Stovall.
Markets reward patience
It is incredibly difficult to pinpoint a market bottom in the midst of a slump. What matters for investors is being patient and having a plan, according to Yusuf Abugideiri, a certified financial planner and chief investment officer at Yeske Buie.
“The patient, disciplined, policy-based investor ultimately is going to be rewarded over the long run,” Abugideiri said. “That’s the way the market makes you work for the returns. You’ve got to be patient; you’ve got to be disciplined.”
Younger investors with long-term goals should see a market correction as a buying opportunity while stocks are on sale, he said. Meanwhile, if you are approaching retirement, diversifying your portfolio into more Treasuries and cash equivalents like money market funds can help protect your investments.
While a variety of factors influence finding a bottom, Abugideiri said, the outlook for the market largely hinges on investors getting more clarity from the White House.
“If investors get more clarity and have to deal with less uncertainty, markets are going to react favorably,” Abugideiri said.