On Monday, the S&P 500 continued its upward trajectory, building on Friday’s significant gains. This movement comes as investors recover from the index experiencing its first correction in more than a year.
The S&P 500 rose by 0.6% on Monday following a 2.1% surge on Friday—the best performance since the day after Donald Trump secured re-election. This correction last week marked the first since 2023, which included a pullback that Treasury Secretary Scott Bessent described as both ‘healthy’ and ‘normal.’ Morgan Stanley’s analysts predict a potential short-term relief rally, though they caution that market volatility is expected to persist throughout the year.
Monday’s broad market rally saw over 90% of the S&P 500’s components ending the day positive, though notable exceptions included big tech giants. Tesla’s stock fell nearly 5%, while Nvidia saw a decrease of almost 2%. Alphabet, Amazon, and Meta also finished in negative territory, whereas Apple and Microsoft recorded minimal gains.
Investor concerns are partly attributed to the Trump administration’s aggressive tariff policies, which are feared to lead to price increases, slower growth, and a decline in investment and hiring. These concerns contributed to a drop in consumer confidence, which recently hit its lowest level since 2022. In defense, Treasury Secretary Scott Bessent has argued that while Trump’s tariffs have stirred market disruptions, his tax and deregulation proposals could bolster market stability and growth in the long term.
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Morgan Stanley analysts emphasize that while the market may benefit from President Trump’s policy agenda in the long run, the path to recovery will not be straightforward. They observe that stocks last week were oversold to levels not seen since 2022, contributing to optimism for immediate market prospects. Additionally, signs of improving sentiment and seasonal strength in March support a positive short-term outlook. However, sustained rallies will require more than an oversold market; a broader trend of earnings revisions will be crucial for ongoing growth.
While the current market rally offers a glimmer of hope, experts remain cautious. Persistent volatility and reliance on policy developments suggest that sustainable growth will require careful navigation of complex economic factors.
