U.S. Stock Market Faces 5%-10% Drop Amid Trade Policy Impact

The U.S. stock market is on the brink of a new bull market cycle, according to recent analysis. However, this optimism is accompanied by a prediction of a short-term decline of 5% to 10% in the current quarter. The anticipated drop is due to the impact of trade policies, which are expected to start reflecting on corporate balance sheets. This downturn is seen as a temporary setback, providing an attractive entry point for investors to participate in the subsequent upward trend driven by improved corporate earnings expectations.

New bull markets often begin with rapid movements, catching many investors off guard. The speed of change is accelerating, surpassing market expectations. Any market pullback is expected to be brief and mild, offering a buying opportunity for those who are prepared. The recent surge in the S&P 500 index, which has added approximately 115,000 billion in market value over a few months, underscores the market's resilience despite trade uncertainties.

The optimism is bolstered by the recent passage of significant legislation, which is expected to boost profit growth and enhance investor sentiment. Despite the short-term risks posed by trade policy uncertainties, the market is anticipated to continue its upward trajectory. The analysis suggests that the market has already bottomed out in April, with all key indicators showing a sharp turnaround and exceeding expectations.

The upcoming quarter is seen as a period of risk due to the potential impact of tariffs on sales costs. However, this effect is expected to be temporary, with investors quickly shifting their focus to the anticipated growth in 2026. The market's resilience in the face of trade policy uncertainties has been a significant driver of the recent rally in the S&P 500 index. The analysis concludes that while short-term volatility may occur, the overall trend remains positive, with the market poised for further gains.