Investing Updates : Fear or Greed? Decoding S&P 500 Corrections: 61% Rebound Chance Since 1929

Source : 

https://www.moomoo.com/community/feed/fear-or-greed-decoding-s-p-500-corrections-61-rebound-114188746031110

Apple Intelligence :

• Market Correction: The S&P 500 experienced a 10.1% correction, erasing gains from the “Trump rally” and reflecting concerns over tariffs, stagflation, and supply chain issues.

• Historical Rebound Probability: Since 1929, the S&P 500 has a 61% chance of rebounding after a correction, with an average return of 18% in the subsequent 12 months.

• Recent Performance: The S&P 500 has shown resilience, with an average return of 18% in the 12 months following nine corrections since 2010, excluding the 2022 decline due to interest rate hikes.

• Market Downturn Triggers: Trade frictions escalating to systemic risks, like the 2000 dot-com bubble, can lead to prolonged downturns.

• Bearish Argument: Unpriced risks include tariff impact, stagflation concerns, and a tech stock retreat.

• Bullish Argument: Robust corporate earnings support market resilience.

• Investment Strategy: Gradual position building with 10%-15% cash reserve, increasing allocation to utilities and consumer staples, and reducing exposure to tech and industrial stocks.

• Hedging Recommendations: Consider gold ETFs or VIX call options to hedge against potential market downturns.

• Liquidity Support: Potential rate cuts and lower Treasury yields provide some support to the stock market.

• Investment Strategy: Long-term investment in S&P 500 put options (15% out-of-the-money) and defensive stocks.

• Defensive Stock Sectors: Consumer staples and healthcare.

• Short-Term Monitoring: Changes in White House tariff policies and CPI/PMI data to alleviate stagflation concerns.