Global markets today: Wall Street sees a strong recovery after stock market crash. Is it a dead cat bounce?

Global markets today: Wall Street indices posted strong gains on Friday as investors seized buying opportunities following the recent US stock market downturn.

The S&P 500 surged 2.13 per cent, while the tech-heavy Nasdaq jumped 2.61 per cent on Friday. However, both indices extended their losing streaks to a fourth consecutive week. The S&P 500 ended the week down 2.3 per cent, while the Nasdaq lost 2.4 per cent.

So far in March, the Nasdaq and the S&P 500 have plunged 6 per cent and over 5 per cent, respectively, amid concerns over the economic impact of President Donald Trump's tariff policy, fears of a looming recession, and overvalued tech stocks.

A dead cat bounce or sustained recovery on cards?

The US stock market is facing multiple headwinds, and experts remain sceptical about its prospects for a sustained recovery.

This could be primarily because of significant uncertainty about the health of the US economy.

According to Soumya Kanti Ghosh, Group Chief Economic Adviser at State Bank of India, long trends indicate a possible downturn in US GDP growth along with a slowdown in US exports and consumption.

"Trends indicate that the jump in the US economy post-COVID may have been an outlier because of policy extravaganza. Long-term trends indicate a possible downturn in the US economy's GDP growth and a slowdown in US exports and consumption. The overall US value adds show a declining trend with shrinking TFP (total factor productivity) growth. Net savings to GDP (gross domestic product) is also at the lowest level since 2011 and second lowest since 1951," Ghosh noted.

Ghosh highlighted that if structural adjustments gain momentum, the US's potential GDP trend can move upward. Moreover, the resulting private sector expansion and technological progress can further boost growth.

Ghosh, however, warned, "This adjustment will have short-term costs and has lots of ifs and buts.”

Experts believe global markets have lost momentum due to questionable earnings guidance after the arrival of China's DeepSeek and heightened market volatility.

"After doling out stupendous returns, most markets, including the US markets, appear to have run out of breath, trimming all intermittent gains as investors increasingly question earnings guidance against ‘pricing in’ of unebbing volatility. The magnificent seven, too, are showing signs of crack after the DeepSeek phenomenon," said Ghosh.

President Trump's aggressive tariff policy has triggered a trade war. Stock market sentiment is fragile due to apprehensions that the trade tussle will drive up inflation and further hit economic growth, which has already been sliding in the last year.

Ghosh pointed out that from 3.2 per cent in Q4 2023, US GDP growth decelerated to 2.5 per cent in Q4 2024.

Arindam Mandal, Head of Global Equities at Marcellus Investment Managers, believes the year ahead could be challenging due to a spike in consumer inflation and a slowdown in growth.

"The key number that we should look at is the jobs number. We are probably fine as long as the unemployment print does not go beyond 4.5. If the economy weakens, a quicker rate-cut cycle may occur. This will soften the 10-year bond yields, which could support equities. But, we are a little uncomfortable going into the year," said Mandal.

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