This market reduction is normal, but a greater correction can be ahead

Given fear as represented in investor surveys and several feelings indicators a couple of weeks ago, one would think that the recent market reduction was significant. As a testimony of concern, the feeling of investors reached the bearish levels that had only witnessed during the reduction of the significantly larger market, not the relatively miserable decrease of 6.5% from the beginning of 2025 to the recent minimum. Therefore, to help soothe the nerves of investors, we provide a historical context to put perspective in market activity this year to date.

The histogram, with data that date back to 1975, shows the number of annual market reduction instances in 1%increases. We highlight the current decrease of 6.5% in yellow. As shown, there have been another five years in which the market had a similar reduction. In addition, on average, the market experiences a 13.3% decrease every year. As the graph shows, there is nothing abnormal in the recent fainting. Even if another 6% or so fell, it would still be a typical year. It is worth noting that there are still nine months left in the year, and there is nothing to say that the market touches the background last week. On the contrary, we cannot know if the trend of the bull that began at the end of 2022 is over.

The important conclusion is that the historical context for recent losses is essential to handle our fears and behavioral instincts, which often work against our best interests.

What to see today

Earnings

Economy

Market negotiation update

, We argue that correction probably ends, at least for now, since multiple signals confirm that buyers are returning to the market. In particular, that does not mean that another correction cannot happen; The market is likely to meet first, giving investors the opportunity to rebalance the risk of portfolio as necessary. The table below shows the possible levels of recoil of recent minimums. The market initially fought in the initial resistance of the retreat level of 23.6%. However, Monday’s Rally pushed the market above the key resistance in 200-DMA and activated the impulse purchase signal. While that is short -term optimistic, the market has several challenges.

The next key resistance level will be the 50%recoil level, around 5831. However, if the market can eliminate 50%decline, it will have to deal with 50 and 100-DMA, which also highlight 61.8%of recoil level in 5904. I suspect that the market will be sufficient exaggerated by the time it reaches this level. In addition, many investors were trapped in the recent Sharp sale victim, so they will look for an exit, which will probably bring sellers to the market. Yes, and I suspect that this is a reasonably significant obstacle, the market can move above the 61.8%setback, it is likely to move to the previous maximums. However, given the current market dynamics, the slowdown in economic growth and high levels of uncertainty of economic policy, a concentration of historical maximums faces significant challenges.

As such, we recommend that investors use the current rally to rebalance the risk of portfolio, increase cash levels as necessary and consider adjusting the weights of the portfolio and reduce leverage to reduce the general volatility of the portfolio. As always is the case, if the market joins and the portfolio risk is reduced, it is always a simplistic process to increase portfolio exhibitions if the market backdrop improves.

On April 2 it could be a negative surprise, according to Goldman Sachs

Recently, it seems that Donald Trump has taken a more friendly path with tariffs. For example, Monday declared:

I can give many breaks from countries. It is reciprocal, but we could be even more friendly than that. You know, we have been very friendly with many countries for a long time..

Goldman Sachs warns that this may not be the case, and markets can no longer have a price in a negative surprise. According to its logic, the Trump administration uses tariffs as a negotiation tool. Therefore, they may want to start with higher rates and negotiate them in the future. A recent Goldman survey shows that market participants believe that reciprocal tariffs that begin on April 2 will amount to a 9%reciprocal rate rate. Goldman Sachs expects the initial tariff rate to be double that, establishing investors for a negative surprise.

While the market has gathered in Trump’s most flexible position, betting markets are not as optimistic, as shown below.

Correction ends? Or more to go?

The most important question I have been receiving from clients and prospects lately is, “Was the correction ended?”

This is not surprising, since market decreases are brutal in emotions. However, as investors, we often forget that, like the laws of gravity, “What goes up must go down.”

Therefore, in today’s blog post, I want to provide two conclusions:

1. The technical backdrop of the market: does a negotiable fund for investors and;
2. A list of rules for investors to continue to navigate what is coming later.

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