With its skyrocketing valuations and continued strength amid volatility, the S&P 500 has risen 1.46% in 2025 following a 20% plus gain in 2023 and 2024. As experts predict an overdue correction, this analyst says the ongoing “sideways consolidation” over the last three months could be “corrective,” in nature.
What Happened: Last time the S&P 500 experienced a correction, which is a decline of 10% or more from highs, was over a year ago in October 2023.
On an average, the markets have experienced at least one pullback in a year over the last 100 years, says the investment strategist at Edward Jones, Angelo Kourkafas, adding that “we may be overdue for one.”
However, he explains that the current “sideways” movement of prices over the last quarter could be serving as its “corrective” mechanism.
“More importantly, even if the current pullback turns into a correction, we don’t think it will progress into something worse, as there are no signs of either an economic downturn, a decline in corporate profits, or Fed rate hikes in the horizon,” he said.
The current landscape is marked by “known unknowns” stemming from policy uncertainty and trade concerns, Kourkafas explained.
President Donald Trump‘s proposed policies on deregulation, tax cuts, and ongoing tariff negotiations have kept the financial market participants on their toes. These factors are likely to contribute to heightened market volatility in the coming months, said Kourkafas.
Why It Matters: According to Kourkafas, to navigate these swings, investors should consider rebalancing their portfolios and implementing dollar-cost averaging strategies, which can capitalize on price fluctuations.
He further emphasized on how the market leadership is broadening, with a shift away from U.S. large-cap, tech, and growth investments towards cyclical, value-style, and international equities.
“A focus on balance and diversification can potentially better help weather short-term dips, which over the long term are nearly impossible to avoid. We maintain the view that equities have the potential to build on last year’s strength, though with more moderate gains and higher volatility as market leadership continues to evolve,” he said.
Meanwhile, other experts like Howard Marks, who famously predicted the dot-com crash, have also cautioned against the formation of a bubble in the market. In his memo dated Jan. 7, Marks points to several "cautionary signs" in the current market, including soaring valuations, AI hype, and heavy reliance on mega-cap tech stocks.
Marks also underscored research from JP Morgan Asset Management showing that high valuations like today's often precede lackluster returns over the following decade.
Price Action: The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, rose in premarket on Monday. The SPY was up 0.34% to $596.18, and the QQQ also advanced 0.55% to $510.88, according to Benzinga Pro data.
On Friday, the SPY closed up 1.56% to $594.18, and the QQQ advanced 1.56% to end at $508.10.
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