Stocks have surged on Wall Street since President Donald Trump’s inauguration, with the S&P 500 reaching its best week since November. The market has benefited from Trump’s pro-growth policies, lifting risk assets such as bitcoin and oil stocks. However, experts warn that this optimism could be short-lived.
Goldman Sachs’ head of asset allocation research, Christian Mueller-Glissmann, says the probability of a S&P 500 drawdown has increased due to high valuations and rising bond yields. The US momentum stock market is also at near extremes, with analysts expecting significant growth in earnings this year.
Despite this, some experts remain optimistic about the market’s future. Canaccord Genuity analyst Michael Welch expects a rally to continue in 2025, driven by expected earnings growth of over 12%. However, he notes that there may be some initial downside before the market moves forward.
The median drawdown in the first quarter following a gain is typically around 4.4%, which could set the stage for a positive calendar year advance. With Trump’s policies continuing to shape the market, investors will need to keep a close eye on valuations and economic trends to make informed investment decisions.
Source: https://www.cnbc.com/2025/01/21/correction-risks-are-lingering-for-market-despite-trump-optimism.html