Was That the Bottom?

The financial markets have endured a punishing stretch in 2025, leaving investors wrestling with a critical question: Is this the bottom? Since February, the S&P 500 has tumbled significantly from its highs, entering a correction that has shaken confidence across portfolios. The Trump administration’s tariff announcements earlier this month intensified the decline, but the roots of this downturn run deeper—the trade news merely acted as a spark. At Vorpp Capital, we remain cautious, unconvinced that the worst is behind us. From macroeconomic pressures to geopolitical unrest, persistent uncertainties surrounding trade policies, troubling signals in the bond market, and technical indicators pointing to complacency, we see compelling reasons to suspect this may be only the beginning of a larger correction. This article explores the forces driving the market lower, why we doubt a bottom has formed, and whether investors should prepare for further declines or hope for a rebound. In a year fraught with uncertainty, clarity is elusive, but let’s dive in to unpack what’s at play.

What Sparked the Correction?

The market’s slide began well before the tariff headlines grabbed attention. Early in 2025, signs of trouble emerged—stocks, especially in technology, were priced at lofty valuations, and the broader economy showed cracks. Consumer spending was slowing, businesses were scaling back, and global growth projections painted a subdued picture. The S&P 500, buoyed by a robust performance in 2024, started to falter as investors questioned whether the rally had overstayed its welcome. By February, the correction was underway, a gradual descent that signaled deeper unease.

The tariff announcements accelerated the fall. News of trade measures rattled markets, amplifying fears of economic disruption and strained international relationships. However, let’s be clear: tariffs didn’t ignite this decline—they simply poured fuel on an existing fire. Investor sentiment was already fragile, and the trade developments gave traders a reason to sell more aggressively. Consumer confidence plummeted, with households bracing for tougher times ahead. The pressing issue now is not what caused the drop but whether we’ve reached a turning point or are merely pausing before further losses.

Is This the Bottom? Why We’re Skeptical

At Vorpp Capital, we’re not ready to call this the bottom. The market’s correction has been sharp, but several factors suggest that more challenges lie ahead. While some investors see a buying opportunity, pointing to historical recoveries after similar declines, we see too many warning signs to declare the storm over.

Macroeconomic Concerns

The global economy is navigating a delicate balance, and the U.S. is no exception. Contrary to earlier expectations, inflation is trending downward globally, including in the United States, largely due to a contraction in the money supply. Historically, such contractions—where the amount of money circulating shrinks—have often preceded recessions, raising serious concerns. While lower inflation might sound like good news, this dynamic risks tipping the economy into deflation, where prices fall broadly, discouraging spending and investment. Deflation can spiral into a recession or, in extreme cases, a depression, as businesses cut back and consumers hoard cash. The U.S. economy is already showing signs of strain—growth is sluggish, unemployment is edging higher, and consumer confidence remains subdued. These conditions don’t inspire confidence in a market recovery; instead, they suggest a market that hasn’t fully grappled with the potential for deeper economic trouble.

Geopolitical Turbulence

Global stability remains precarious, adding fuel to market uncertainty. Tensions between the U.S. and China persist, driven by trade disputes and broader strategic rivalries. Conflicts in Ukraine and the Middle East continue unabated, while recent escalations involving the U.S., Israel, and Iran threaten to open new fault lines. Unlike two or three decades ago, when Middle East unrest could significantly disrupt oil markets, today’s impact is less pronounced—oil prices are currently around $61 per barrel and trending lower, reflecting ample global supply. A recession would likely push oil prices even further down, potentially dragging related sectors with it. Nevertheless, these geopolitical risks create a pervasive sense of unease, unsettling investors and clouding economic forecasts. Markets thrive on predictability, and there’s little of that to be found right now.

Trade Policy Uncertainties

The tariff saga remains a wildcard. The administration’s decision to postpone trade measures has opened a window for negotiations, but the underlying strategy hasn’t shifted—there’s still talk of using import duties as a major revenue source in the future. The outcome of these talks will shape market sentiment, but early indications suggest tough sledding. China, as we’ve explored before, approaches negotiations with a deep sense of pride—public posturing or dismissive rhetoric from U.S. officials is unlikely to yield concessions. The European Union, with its distinct political priorities, poses another challenge, as alignment with the current U.S. administration appears elusive. Should negotiations falter and trade barriers return in full force, markets could face renewed pressure, interpreting it as a sign of prolonged economic friction. Even a partial resolution would keep uncertainty alive, making it difficult for investors to commit to a lasting rally.

Bond Market Signals

The bond market is raising red flags that cannot be ignored. Treasury yields are climbing as investors demand higher returns to hold U.S. debt, reflecting concerns about economic stability. More troubling, foreign investors—who hold a significant portion of U.S. Treasuries—are showing signs of pulling back, wary of America’s trade policies and political volatility. This erosion of confidence could accelerate if yields continue to rise while stock prices decline, signaling a broader retreat from U.S. assets, including both equities and bonds. Such a decoupling—driven by a loss of trust in U.S. leadership—has the potential to trigger a more severe market sell-off, pushing indices well below current levels. The bond market isn’t offering reassurance; it’s sounding an alarm.

Technical Perspective: A Market in Complacency

From a charting standpoint, the market’s behavior suggests we’re far from a true low. Technical analysts often refer to the psychology of market cycles, where fear transitions to complacency, then panic, before a genuine bottom emerges. Right now, we appear to be in the complacency phase. The S&P’s sharp decline was followed by a modest rebound, prompting some traders to assume the worst is over. Trading activity has quieted, and market volatility has eased slightly—hallmarks of a pause rather than a reversal. True bottoms are marked by intense fear, with trading volumes surging and volatility spiking to levels seen in past crises, such as 2020 or 2008. Those conditions haven’t materialized yet. Momentum indicators remain neutral, and resistance levels loom above current prices, suggesting this bounce may be fleeting. The probabilities point to further downside—potentially significant—until we witness real capitulation, where investors collectively surrender to panic.

Could This Be the End? The Optimistic View

Some investors argue that this correction has run its course. Historically, declines of this magnitude often signal a turning point—market corrections tend to find a floor after a certain threshold, followed by recoveries within a year or so, according to long-term studies. Stock valuations have moderated from their peaks, making established companies appear more attractive. Firms with strong fundamentals could hold steady even as economic challenges persist. The Federal Reserve, though constrained by deflation risks, might adopt a more supportive stance if the economy weakens significantly, potentially sparking a short-term rally. Progress in trade negotiations—perhaps a compromise with China or the EU—could boost confidence, encouraging investors to return.

However, this hopeful scenario feels tenuous. Deflationary pressures and the threat of recession limit the Fed’s options, and geopolitical tensions show no signs of abating. Corporate earnings require a robust economy to grow, and the current environment falls short. A temporary uptick in stock prices is possible, but a sustained climb to previous highs seems unlikely without substantial positive developments.

A Larger Correction on the Horizon?

At Vorpp Capital, we’re bracing for the possibility of a deeper correction. While we’re not predicting a catastrophic collapse, several scenarios could drive markets lower:

• Trade Negotiations Stumble: If talks with China or the EU fail to produce meaningful agreements, renewed trade pressures could dampen economic prospects. Markets would likely react with further selling, anticipating prolonged uncertainty.
• Geopolitical Escalations: A flare-up in ongoing conflicts or new crises could erode investor confidence further. While oil prices are less sensitive to regional disruptions than in the past, broader instability could still weigh heavily on sentiment.
• Economic Downturn Intensifies: A slide into recession—already a meaningful risk, given money supply contraction—would curb demand across sectors. Falling oil prices could accelerate this, hitting energy companies and related industries.
• Bond Market Pressures: Continued rises in Treasury yields alongside declining stock prices would signal a loss of faith in U.S. assets. If foreign investors accelerate their retreat, a broader sell-off could take hold, dragging markets to new lows.

These risks aren’t inevitable, but they’re credible. The market’s current calm suggests it hasn’t fully absorbed these possibilities—a deeper correction wouldn’t be surprising.

Strategies for Investors

With uncertainty at the forefront, investors must tread carefully. Here are some considerations:

• Remain Adaptable: Short-term traders can capitalize on market swings, buying at potential support levels and selling into rallies. Longer-term investors should hold off until clearer signs of a bottom emerge, such as heightened volatility indicating widespread panic.
• Prioritize Safety: Assets like gold or inflation-protected bonds can provide stability—they’ve proven resilient in turbulent times. Companies with lower valuations may offer a buffer compared to pricier sectors.
• Preserve Liquidity: Maintaining cash reserves allows investors to seize opportunities if markets decline further. Bargains tend to appear when fear peaks, not during quiet stretches.
• Monitor Bonds Closely: Rising Treasury yields paired with falling stocks are a warning sign. Keep an eye on foreign investment trends—a pullback could signal bigger trouble.

Patience has been my ally in past market turmoil—waiting for the right moment can make all the difference. Acting too soon in this environment carries risks.

Final Thoughts: The Search for a True Bottom Continues

At Vorpp Capital, we believe the market’s correction in 2025 is far from over. While it is impossible to predict where the market goes next, we think probabilities would suggest that we see more downside before we see a sustainable new bull market. It is always important to understand that the articles we write are based on the best information which is currently available. This can change in an instance and tomorrow we could already change our mind and be bullish longterm. This is the task of a real trade. Trade what is available to you NOW and not act on hopes etc.

The decline since February reflects more than just trade policy headlines—it’s a response to an economy grappling with slowing growth, a world unsettled by conflict, and investors too eager to call the end. Global inflation is easing, particularly in the U.S., where money supply contraction is driving prices down. While this might seem positive, history warns that such contractions often lead to recessions, and the specter of deflation—or worse, a depression—looms as a serious concern. Trade negotiations remain fraught, with China and the EU unlikely to align easily with U.S. demands. Geopolitical risks persist, and the bond market signals growing unease, hinting at a potential retreat from U.S. assets. Technical indicators suggest we’re in a complacent lull, not a panicked bottom. This isn’t the capitulation that marks true lows—it’s a moment to stay cautious. Gold, bonds, and cash offer refuge while the market searches for its footing. The bottom is out there, but we might just haven’t found it yet.

Do not consider this article as financial advice. We only showcase our own opinion. Always do your own due diligence before investing in alternative (volatile) investment opportunities.