Is the rebound in US stocks a "flash in the pan"? What Wall Street is most worried about is Trump and the Federal Reserve

After experiencing a decline of over 10% in less than a month, the S&P 500 index has risen for two consecutive trading days.

Investors are concerned whether this market rebound is just a "flash in the pan." Although some stocks are "cheaper" than a month ago, investors have not seen enough convincing reasons to prompt them to enter the market now. A large amount of survey data indicates that people are worried about the potential impact of tariffs on consumer and business spending.

Deutsche Bank's chief strategist Bankhim Chadha believes that the sell-off in the U.S. stock market is not over.

Morgan Stanley's chief investment officer Mike Wilson also stated that the market may experience a "tradeable rebound," but unless "numerous growth headwinds (Trump's tariff policy) are reversed" or the Federal Reserve resumes interest rate cuts, he believes a sustainable rebound to new historical highs is unlikely.

Rebound Still Needs "Catalysts," Tariff Policy is Key

Currently, Trump's trade policy and the resulting concerns about economic growth slowdown have become the main reasons for the market sell-off. Although there is no clear data indicating that the impact has manifested yet, market uncertainty about the future is increasing.

Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, stated that despite the concerning market atmosphere, there are no clear signals indicating whether there are opportunities for reverse arbitrage.

From a corporate perspective, the earnings forecasts from Walmart and other companies suggest that trade tariffs may have a substantial impact on corporate profits. Delta Air Lines has warned that its earnings will fall below expectations due to a decline in domestic demand caused by "macroeconomic uncertainty."

However, the market will need to wait for the first-quarter earnings reports starting on April 11 to fully understand how companies are responding in the current environment.

The upcoming Federal Reserve meeting could become a key catalyst for the market. Investors are eagerly seeking more clues about whether the Federal Reserve will cut interest rates this year. If the Federal Reserve adopts a dovish stance, the market may experience a short-term rebound. However, if the Federal Reserve continues to maintain a tight monetary policy, the market may face greater pressure.

From a technical perspective, many strategists point out that the S&P 500's rebound has returned to normal levels, without reaching a buy signal. Chadha from Deutsche Bank mentioned that investors' allocation to stocks has significantly decreased over the past month and has not yet reached the bottom levels seen during the Trump trade war. He predicts that if investors continue to withdraw funds, the S&P 500 could fall to 5250 points in the future.

In light of the new round of tariffs that Trump is set to announce on April 2, Chadha hopes to see a concrete plan that can eliminate market uncertainty:

"If the policy can be effectively resolved, the S&P 500 is expected to soar to 7000 points this year. Conversely, if the tariff policy fails to adjust, the growing concerns about economic slowdown will pose further challenges for the market."