The early 2025 selloff was breathtaking in its speed and intensity.
It took just 22 days for the S&P 500 to enter correction territory from its record highs in November—a fraction of the time it usually takes, according to CFRA Research. “It was a free-fall moment,” said Kevin Gordon, senior investment strategist at Charles Schwab. “Investor sentiment got to panic levels.”
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The recovery has been just as swift, the fastest since 1982. According to Bespoke Investment Group, returning to positive territory took 25 trading days from a 15% drop earlier in the year. “Investors think the worst is likely over and that the reason for the panic has largely been undone,” said Sam Stovall, chief investment strategist at CFRA Research.
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In April, market sentiment signaled “extreme fear” among investors, crashing to three on a scale of one to 100. The gauge has since completely rebounded and is now in “greed” territory. The tech sector has largely led the rally. Apple and Amazon stocks have surged more than 20% apiece since the April 8 low. Nvidia has spiked more than 40%.
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However, the upswing is broader than tech: Consumer discretionary, industrial, communication services, and financials rallied on Wall Street in the past month. Whenever tariffs have been dialed back, forecasters have cut their odds of a recession. According to JPMorgan Chase economists, the chance of a US recession is now less than 50%, down from 60% in early April.
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Swift recovery in market sentiment
Goldman Sachs now sees a 35% chance of a recession, down from 45% before the US-China breakthrough on trade. “There was a tremendous amount of anxiety about Trump’s tariffs causing turmoil and uncertainty,” said Yardeni, adding, “Trump couldn’t afford to let this issue fester.”
The rapid recovery has spurred other investor concerns, with many worried the rally is overextended. “The market has raced from oversold to overbought in record time,” said Mark Hackett, chief market strategist at Nationwide.
“That limits near-term upside unless we see a clear reacceleration in growth.”
UBS recently downgraded its stance on US stocks from “attractive” to “neutral,” cautioning that much of the good news has already been priced in and challenging news is likely coming. There is still significant uncertainty. CFRA’s Stovall notes that in two-thirds of all bear markets since World War II, the S&P 500 ultimately made even lower lows after recovering from double-digit percentage declines.
The biggest X-factor remains Trump and his evolving trade agenda. “This was a manufactured correction,” said Stovall, “and it could be remanufactured if the president wants to change his mind about things.”
