Bonds Tumble as Stocks Wipe Out Losses

After a massive $9.5 trillion loss in global markets, stocks finally found some stability as traders tried to determine whether markets had bottomed out. On Monday, the S&P 500 managed to climb 3%, reversing a sharp intraday drop of nearly 5%.

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Meanwhile, bond markets also pulled back from their earlier rally, although traders continued to price in around 100 basis points of interest rate cuts by the end of 2025 — the equivalent of four quarter-point reductions.

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Investors searching for a bottom in equities are bracing for another turbulent week, as fears mount that the escalating trade war could tip the global economy into recession. Prominent Wall Street figures, including billionaires Bill Ackman and Stanley Druckenmiller, strongly criticized President Donald Trump’s broad tariff plans. JPMorgan CEO Jamie Dimon also voiced concerns, calling for a swift resolution to calm markets.

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According to National Economic Council Director Kevin Hassett, over 50 countries have responded to U.S. tariffs with proposals for "great" deals. Yet, market watchers like Chris Larkin at E*Trade from Morgan Stanley believe that Washington’s actions will continue to steer market direction. Larkin noted that some of the steepest market lows in past decades followed similarly volatile periods, although predicting the true bottom remains elusive.

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Matt Maley of Miller Tabak cautioned that tariffs are just one of several factors weighing on markets. Those hoping for a quick V-shaped rebound may be setting themselves up for disappointment, he warned.

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“We may see a solid short-term bounce, but revaluing the market to reflect realistic economic expectations will take time,” he said, adding that investors will have better entry opportunities once the worst of the decline has passed.

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HSBC’s Max Kettner also foresees a brief rally, especially for the tech-heavy “Magnificent Seven,” but he sees that as a temporary rebound before another potential leg downward. Similarly, Morgan Stanley’s Michael Wilson warned that unless tariff tensions ease, the S&P 500 could fall even further.

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Jonathan Krinsky of BTIG said many indicators are flashing panic-level signals, the kind that typically precede market bottoms. However, he added that in such “capitulation zones,” markets often overshoot what most investors consider possible.

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Supporting this view, Goldman Sachs reported that hedge funds made their largest-ever single-day net sale of global equities right after Trump’s tariff announcement. JPMorgan’s own prime brokerage division also reported aggressive selling by hedge funds, suggesting that market positioning is approaching a tactical low point.

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Retail investors, however, have yet to fully retreat from equities — a sign that the selloff might not be over just yet, according to Goldman Sachs’ trading desk. The recent plunge has pushed U.S. stock valuations down to levels not seen since late 2023.

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Strategists at Bespoke Investment Group said investors are clearly on the lookout for signs that the downward spiral may be easing. But they cautioned against relying on market bottom predictions. “Every opinion on when this decline will end is just a guess,” they said. “Nobody knows for sure.”

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Larry Tentarelli of the Blue Chip Daily Trend Report advised investors to remain defensive, holding more cash than usual and avoiding new buying until volatility declines. “The market’s path will depend on tariff-related news,” he said. “A major breakthrough could help, but until then, expect very wide swings in trading.”

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Richard Saperstein of Treasury Partners characterized the market’s steep drop as a repricing event to reflect the likelihood of a recession triggered by tariffs. He believes that stocks won’t begin to recover until several things happen: tariffs must be reduced or eliminated, valuations must become significantly more attractive, and underlying economic conditions must improve — none of which seem likely in the near term.

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Meanwhile, Wall Street strategists have started lowering their expectations for U.S. equities. JPMorgan’s Dubravko Lakos-Bujas cut his year-end forecast for the S&P 500 to 5,200 from a previously optimistic 6,500. John Stoltzfus of Oppenheimer, once the most bullish strategist on Wall Street, reduced his target to 5,950 from 7,100. Analysts at Evercore ISI, Goldman Sachs, and Societe Generale have also downgraded their projections recently.

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In a note to clients, Stoltzfus said the current uncertainty is more than what most investors can tolerate, calling the outlook “a negative pitch book that seemingly projects negative outcomes to infinity.”

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UBS Global Wealth Management’s Solita Marcelli offered a more hopeful scenario. She said that after an initial spike in tariffs, the effective U.S. tariff rate might begin to decline by the third quarter. In that case, and with the Federal Reserve potentially cutting rates by 75 to 100 basis points to support the economy, she believes the S&P 500 could rebound to around 5,800 by year’s end.

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