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Stock Market Alert: Experts Predict 16% Correction in 2025 - What Investors Need to Know

Stock Market Alert: Experts Predict 16% Correction in 2025 – What Investors Need to Know

Market Experts Warn of Potential Stock Market Correction

As the S&P 500 continues its upward trajectory, forecasts for a potential stock market correction are gaining traction among financial experts. Recent performance and technical indicators suggest that the current rally may be nearing its peak, with some analysts predicting a significant downturn in the coming months.

Business Insider recently consulted three prominent equity strategists who foresee an S&P 500 decline of up to 16% this year. These predictions come amid growing concerns about the impact of a new presidential administration and historical data indicating that the current rally may be overextended.

Stephen Suttmeier, a technical strategist, notes that risk increases for 2025 following strong performances in 2023 and 2024. This aligns with historical trends showing that the S&P 500’s average and median returns during the third year of a new bull market are typically lower.

Adan Turnquist, another technical strategist, highlights emerging cracks in market internals and stalled momentum. Only six out of eleven stock market sectors are currently above their 200-day moving average, down from all eleven in December. Additionally, the percentage of S&P 500 stocks above their 200-day moving average has declined sharply.

Will Tamplin of Fairlead Strategies identifies the S&P 500’s rising 200-day moving average as a key support level. He warns that a break below this level could lead to a decline to the 38.2% Fibonacci retracement level, representing a potential downside of 10% from current levels and a peak-to-trough decline of about 13%.

Ross Mayfield from Baird remains bullish for 2025 but acknowledges the potential for a correction. Historical data suggests that a correction is overdue after a strong two-year rally, with Mayfield predicting a downturn of up to 15%, aligning with historical averages.

Sam Stovall of CFRA Research notes that the year started poorly, with the Santa Claus Rally failing to materialize. He points to a key Fibonacci level at 5,130 as crucial support for investors to monitor. A decline to this level would represent a peak-to-trough decline of 16%, reminiscent of the last similar decline in 2022 driven by surging bond yields.

As concerns about a potential stock market correction continue to rise, investors are advised to remain vigilant. Technical indicators and historical patterns suggest caution as the market faces potential headwinds in the coming months.