S&P500 and Nasdaq 100: Are US Stocks Set for a Rebound as Bearish Sentiment Eases?

Wall Street Bears Rethink as Extreme Pessimism Spurs Rebound Potential

After a stretch of persistent selling pressure, U.S. equity markets are showing early signs of stabilization. The S&P 500 and Nasdaq snapped their four-week losing streaks, with sentiment starting to shift as even Wall Street’s most entrenched bears point to a potential short-term bounce. While longer-term risks remain, growing evidence suggests recent market pessimism may have reached unsustainable levels.

Are Bears Turning Cautiously Optimistic?

Notable bearish strategists have begun highlighting tactical upside. Stifel’s Barry Bannister, who holds a 5,500 year-end S&P 500 target, now sees the index reaching 5,850 by mid-year. BCA Research’s Peter Berezin, despite entering the year with a deeply negative outlook, outlined several bullish scenarios including a potential easing in Trump’s tariff stance and AI-driven productivity gains.

Even Albert Edwards of Societe Generale, long known for his bearish views, acknowledged that excessive pessimism could prompt a near-term rally. Supporting that view, the S&P 500’s 14-day RSI recently dipped below 30, signaling oversold conditions, while sentiment surveys reflect entrenched negativity—nearly 60% of individual investors polled expect lower stock prices in the next six months.

What Do Fund Flows Reveal About Market Sentiment?

Flows confirm the mood shift. U.S. equity funds saw $33.5 billion in outflows for the week ending March 19—the largest since December. Large-cap funds bore the brunt, with $27.4 billion in redemptions, ending a three-week buying streak. Small-, mid-, and multi-cap funds also recorded net selling.

Cash wasn’t the primary beneficiary. Money market funds saw $28.8 billion in outflows, suggesting broader portfolio repositioning rather than simple rotation. Bond markets also saw cracks, with $513 million in net outflows, ending an 11-week inflow streak. Selling hit general domestic taxable funds and floating-rate debt, while Treasury funds attracted relative interest.

Are Headwinds Still a Threat?

Macro headwinds persist. President Trump’s tariff policies remain a market wildcard, with the April 2nd deadline heightening uncertainty. Corporate earnings from FedEx and Nike reflected caution, citing industrial weakness and fading consumer strength. Tech stocks, a prior rally leader, are now lagging—off 14% from recent highs after five consecutive down weeks.

Market Outlook: Relief Rally or Dead-Cat Bounce?

The backdrop of oversold conditions, widespread bearish sentiment, and heavy outflows often precedes tactical recoveries. Still, durable upside may depend on clarity around trade policy and economic momentum. For now, investors should expect continued choppiness.

A disciplined approach—favoring quality stocks, defensive sectors like utilities and healthcare, and dollar-cost averaging—may help manage near-term uncertainty. While a sustained rebound isn’t guaranteed, sentiment has reset to levels where contrarian setups become compelling.

More Information in our Economic Calendar.