Amid market volatility triggered by geopolitical shocks, U.S. stocks have recently experienced a “V-shaped reversal.” Matt Powers, Managing Partner of Powers Advisory Group, stated that while the market may have hit a short-term bottom, its overall trajectory remains highly dependent on external factors. In terms of market performance, the Nasdaq Composite Index rose for 12 consecutive trading days, marking its longest winning streak since 2009; the S&P 500 Index returned to its previous high within 15 trading days, demonstrating strong resilience. Powers noted that this rapid recovery indicates that the market’s underlying trends remain solid, “reflecting that the market possesses considerable capacity to withstand pressure.”
Despite the sharp rebound, Powers cautioned that the current market remains a typical “headline-driven market.” Oil price trends, the pace of Federal Reserve policy, and changes in the geopolitical landscape could all swiftly alter market sentiment. He noted that while some macro risks have been priced in, “we are not yet completely out of the shadow of uncertainty.”
Notably, the current rebound shows clear structural characteristics. Powers pointed out that approximately 40% of the gains since the low have been contributed by a handful of large-cap tech stocks, including Nvidia (NVDA), Microsoft (MSFT), Apple (AAPL), Alphabet (GOOG), and Amazon (AMZN). Meanwhile, the equal-weight S&P 500 Index has significantly underperformed, indicating that most stocks have not participated in the rally. Powers believes that this scenario, driven by a few heavyweight stocks, is unhealthy and does not support a sustainable upward trend. Looking ahead, he emphasized that if the market wishes to extend its gains, it will need broader participation from more sectors and stocks to improve market breadth, while corporate earnings performance will become a key supporting factor.
Despite recent heightened volatility, overall investor sentiment remains relatively stable. Powers said that based on communications with clients, there is currently no panic selling in the market, and “investors are still holding their positions.” He advised investors to avoid overreacting to short-term news fluctuations, especially during geopolitical shocks. “One of the biggest mistakes in the market is trying to react to every piece of news,” he said, emphasizing that markets often rebound swiftly after their worst moments, and missing key up days can significantly impact long-term returns.
Goldman Sachs analyst Morgan believes that a short-term pullback might be the healthiest thing for the market, but the overall upward trend seems difficult to counter. He suggests that buying cheap call options on individual stocks or indices as a substitute for long positions offers very high cost-effectiveness. For hedging tools, Morgan favors using put option spreads or ratio put spreads on the IWM for downside protection. Meanwhile, the Nasdaq 100 Index rose for 13 consecutive days, marking its longest winning streak since 2013, and the Nasdaq Composite Index rose for 13 consecutive days, its longest streak since January 1992. Since 1983, similar consecutive gains have occurred only seven times, with subsequent forward returns being quite impressive. As the earnings season for large-cap U.S. tech stocks kicks off, Goldman Sachs traders note that hedge funds have already begun buying back shares of the seven major tech giants this month, though current positions remain well below the peak levels seen in early 2016.
