AAM Viewpoints — March Could Avoid a Technical Foul

The stock market has presented its own brand of volatility in March this year with abrupt and expansive trading swings. These dramatic movements represent rapid vacillations in investors’ perceptions about the outlook for the economy which are stoked by uncertainties related to tariffs and the Department of Government Efficiency (D.O.G.E.) initiatives. Regardless of these particular concerns, several past Marches have been notable as well for heightened volatility but also for decisive pivots which have launched stocks on a sustainable path to much higher levels. Two examples are:

1. March 2003 when the U.S. invaded Iraq, ending months of geopolitical speculation and uncertainty.
2. March 2020 when investors reacted to myriad complications and unknowns surrounding the COVID 19 pandemic. In both instances, stocks hit a climactic low point before reversing course and bolting higher longer term.

The question remains whether this March can present a similar scenario in which the selling plays out and buyers return with renewed conviction, thereby establishing a formidable base. It is my assessment that March 2025 may have been on track to do just that. Much of the worst selling seemed to have abated by mid-month. This came in the wake of soaring bearish sentiment as reported by the American Association of Individual Investors (AAII). In its weekly survey dated February 26, bearish consensus stood at 60.6% (a multi-year high), while bullish sentiment plunged to 16.4%. These numbers represented drastic changes in investor psychology which could be a precursor to a market recovery. While sentiment alone may not act as a precise timing indicator, when considered along with other technical factors it can provide evidence of an impending change in market direction. The CBOE Volatility Index (VIX) — dubbed the “Fear Index” — made an unsuccessful attempt to cross above the 30 level by mid-month and subsequently pulled back by over 30%. More revealing still was the braking of downward momentum in some of the most hard-hit aggressive growth stocks. At the very least, this may have reflected selling exhaustion, but it could also indicate that some of the deepest concerns about tariffs and D.O.G.E were substantially discounted by investors.

Wall Street pundits have adopted a simple means by which to label a correction or a bear market. It is based solely on the percentage decline of an index or a stock. While this simplistic criterion may be useful as a talking point, it is far less effective as a strategic tool for investing, in my view. Saying that “a 10% decline is a correction” can mask complex technical patterns that might beacon impending buying opportunities. Recently the media was quick to proclaim the S&P 500 was in correction territory when it fell 10%. Since that pullback, however, the index has been in a recovery pattern. Similarly, in March 2020 the S&P 500 fell 20% and was declared to be in a bear market. Subsequently, the index rallied from that level and never looked back.

Defining a trend based simply on a percentage movement could potentially leave investors sidelined when, in fact, the market could be nearing a turning point. History has proven that missing key rally days can significantly compromise longer-term performance. From my technical perspective, there are mounting indications that a meaningful pivot may have occurred in March that I believe could launch the Dow Jones Industrial Average and the S&P 500 into all-time high territory in the months ahead. History may be about to repeat itself.

CRN: 2025-0306-12380 R

The opinions and views of this commentary are that of Peroni Portfolio Advisors and are not necessarily that of Advisors Asset Management.