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The stock market has raised plenty of eyebrows lately. After getting hit hard in early April after President Trump’s tariff announcement on April 2, the S&P 500 skyrocketed by double digits in a remarkable run after Trump paused most of his reciprocal tariffs on April 9.
The dramatic climb has happened despite economic data suggesting the U.S. economy is slowing and amid rising recession risk in the wake of remaining tariffs, including a 145% tariff on China that’s got companies reassessing their outlooks for this year.
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With stocks now back to where they were before Trump’s tariff announcement and sentiment indicators starting to flash warnings, there’s good reason to wonder if there’s still time to "buy the dip" or if investors should switch gears and "sell the rip."
The uncertainty has caught the attention of veteran Wall Street analyst Tom DeMark, whose career spans nearly 50 years advising major money management firms and hedge fund managers like Goldman Sachs, Paul Tudor Jones, George Soros, and Leon Cooperman.
Related: Legendary fund manager makes bold stock market prediction
During his five decades navigating the market, DeMark has had a front row seat to plenty of good and bad market tapes. Recently, he issued a bold prediction that may make investors uneasy.
The Federal Reserve faces a huge challenge
The Federal Reserve has its hands full this year. It’s tasked with a dual mandate to keep inflation and unemployment low, but those goals often contradict each other, and that’s especially true this year.
If the Fed raises interest rates, it can slow the economy, reducing inflation. However, that causes job losses. Alternatively, if the Fed cuts interest rates, economic growth can add jobs and increase inflation.
Related: Warren Buffett sends strong message on trade, tariffs
As a result, Fed Chair Powell has to walk a tightrope on interest rates this year. The Fed’s hawkish monetary policy in 2022 and 2023 crimped inflation, but rising unemployment prompted it to switch gears late last year, cutting rates in September, November, and December.
Unfortunately, inflation progress has stalled, forcing the Fed to the sidelines even as layoffs climb and GDP softens.
Consumer Price Index inflation was 2.4% in April, unchanged from last September. Meanwhile, the unemployment rate has risen to 4.2% from 3.4% in 2023.
In April, companies announced 105,441 layoffs, up 63% year over year. This brings year-to-date job losses to about 602,000, up 87%, according to Challenger, Gray & Christmas.