Market Turbulence: S&P 500 Tests Key Support as Recession Fears Mount
Staff Editor US Markets Face Volatility as Tariff Impacts Loom
US stock indexes are experiencing heightened volatility as investors grapple with the potential impacts of recent tariff announcements. Amid this uncertainty, Morgan Stanley has identified a potential support level for the S&P 500, offering a glimmer of stability in turbulent times.
According to Morgan Stanley’s analysis, the S&P 500 may find support at around 4,700, approximately 6% below current levels. This support level aligns closely with the index’s 200-week moving average, a key technical indicator watched by many market participants.
At this level, valuations are becoming increasingly attractive, as the recent market correction has pulled prices down from their pre-tariff highs. However, the impact of tariffs continues to exacerbate the market decline, with negative earnings revisions playing a significant role in the downturn.
Mike Wilson, a strategist at Morgan Stanley, emphasizes the importance of these earnings revisions in shaping market sentiment. “The tariff situation is adding pressure to an already challenging earnings environment,” Wilson notes.
While the 200-week average has historically provided strong support, uncertainty remains about whether it would hold in the event of a recession. Some analysts suggest that the market may be testing both the President’s stance on tariffs and the Federal Reserve’s commitment to its inflation mandate.
The chances of a tariff-induced recession have increased, according to market observers. Historical data shows that markets often experience significant volatility following spikes in the VIX index, a measure of market fear.
Forecasts for the S&P 500’s future performance vary widely among experts. Peter Berezin, a prominent market analyst, projects the index could fall to 4,450. Berezin has long anticipated market chaos resulting from tariff disputes, though he acknowledges his forecasts may have been overly optimistic in the past.
RBC Capital Markets has also revised its target for the S&P 500, adjusting from 6,200 to 5,550 due to growing concerns about economic growth. This revision takes into account the median drawdown expectations typically seen during recessionary periods.
As markets continue to navigate these uncertain waters, investors remain on high alert for further developments in trade negotiations and economic indicators. The coming weeks are likely to see ongoing volatility as the full impact of recent tariff announcements becomes clearer.
