-
Forecasts for a near-term stock-market correction are getting more plentiful.
-
The S&P 500's recent performance and technical indicators suggest a possible downturn.
-
Business Insider spoke to three equity strategies who see an S&P 500 decline of up to 16% this year.
Talk of potential stock-market correction this year is heating up.
While the S&P 500 is down just 5% from its record high reached on December 6, concerns are brewing that volatility is set to surge this year due to a new President in the White House and historical data that suggests the current rally is getting long in the tooth.
"The S&P 500 can be a victim of its own success. After two strong years in 2023 and 2024, risk increases for an uninspiring 2025," Stephen Suttmeier, technical strategist at Bank of America, said in a recent note.
Suttmeier highlighted that the average and median return for the S&P 500 during the third year of a new bull market is 5%, well below the average annual return of about 10%.
While the major stock market averages are down just a handful of percentage points from their December highs, the internals show that the stock market has suffered a lot of damage.
"A few technical cracks have recently emerged," Adan Turnquist, chief technical strategist at LPL Financial, told Business Insider. "Momentum in stocks has recently stalled as the calendar turned to 2025, while deteriorating breadth measures are flashing potential warning signs for a deeper pullback."
Six of the eleven stock market sectors are trading above their 200-day moving average, down from all eleven in late December. Another measure of market breadth, the percentage of S&P 500 stocks above their 200-day moving average, also decline sharply over the past month, from about 76% to 55% on Wedensday, according to data from StockCharts.
The 200-day moving average is a closely watched technical indicator that helps identify the long-term direction of a trend. When securities fall below their 200-day moving average, it sends a warning sign to traders that the prior uptrend in a stock price could be on the verge of turning into a down trend.
With concerns growing that the stock market could experience an imminent sell-off, Business Insider spoke with three equity strategists to better gauge how painful a potential stock decline could be.
Here's what they had to say.
13% correction — Fairlead Strategies (Will Tamplin)
Will Tamplin, senior analyst at technical analysis research firm Fairlead Strategies, told Business Insider that the S&P 500's rising 200-day moving average is a logical level of support to watch.