Signs of a Bottom Formation in the Stock Market
Warren Pies of 3Fourteen Research, who previously predicted a correction of the S&P 500 by up to 10% in the first half of 2025 back in December 2024, now sees initial signs of a bottom formation in the stock market. As of May 1, 2025, the index has declined by about 4.7% since the beginning of the year, partially validating his forecast.
1. Economic Conditions and Fed Policy
- Weakening Economic Data: According to Pies, the current correction is based on weaker economic indicators that unsettle investors.
- US Federal Reserve Interest Rate Decisions: The Federal Reserve is hesitant to lower interest rates due to political influences from the White House, a key factor for market dynamics.
2. Technical Confirmation Signals
Pies emphasizes that despite approaching potential lows, two concrete signals are required:
- Stabilization of Macroeconomic Data, especially in areas such as employment and corporate profits.
- Decline in Speculative Short Positions: Currently, inverse ETFs dominate (over 50% of speculative ETF trading volume), indicating ongoing risk aversion.
Implications for Retail Investors
- Advised Wait-and-See Approach: Pies advises private investors to consider entering the market only after the aforementioned signals are confirmed.
- Positive Outlook for 2026: Despite short-term hesitance, the medium-term forecast remains optimistic once economic conditions stabilize.
These assessments underscore the importance of a data-driven strategy in volatile market phases.