26.03.25 - Rally loses steam - bull-trap?

Stock markets remain highly volatile. Following a recent correction - defined as a 10% decline from the recent peak - in US indices such as the Nasdaq and S&P 500, markets have rebounded modestly over the past several days. Yesterday, the markets added slight more gains, albeit on lower trading volumes.

Investors continue to seek clear guidance amid ongoing uncertainty. The latest consumer sentiment report this week, highlighted persistent weakness, reflecting growing concerns over economic conditions. Investors are now turning their attention to today's release of the U.S. durable goods orders report, hoping it will provide further clarity on the state of the economy.

Markets: today US futures trading sideways. Europe stocks continue to decline, interest rates see some more pressure on the upside. gold stable above the USD 3’000 level, cryptos with small gains.

My view: With trading volumes diminishing, the recent market rally could quickly run out of steam. Could this signal a “bull trap” - a scenario longtime not seen, in which prices temporary rise, encoring investors to buy, anticipating bullish momentum to continue, subsequently turns out to be temporary or false.

My perspective remains contrarian. I remain cautious about buying into this dip while strategists from prominent investment houses advising clients to accumulate stocks at current levels, even on high number of uncertainties. Numerous geopolitical and economic concerns persist: a ceasefire between Russia and Ukraine remains far away, tensions in the Middle East tensions seem to re-escalate, and looming US tariffs add further instability. In Germany, following recent elections, there was an agreement on a new debt package aimed at infrastructure projects and military aid. However, practical implementation will require significant time, and the formation of a governing coalition has yet to be finalized.

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