A top market strategist believes that the return of one investor crowd could be the key to stopping the stock market sell-off.
On Friday, the S&P 500 dropped more than 2.70% following news of President Donald Trump’s additional tariffs against China.
In a new CNBC interview, Interactive Brokers chief strategist Steve Sosnick says a familiar group of investors has long been the market’s shock absorber during selloffs, but their absence this time could spell trouble.
“I think the key to me will be do the buy-the-dippers show up? Because they’ve been the most reliable people in this market, people buying this dip…
We’ve not really had a meaningful bounce. A lot of times, you get a meaningful bounce on a Friday afternoon just because options are expiring. We’re not, you know, on 600-plus weekly names. We’re not seeing that as of yet. I think this is a little bit of a reminder because look at the way the VIX went from 16 to like 22 in about a microsecond today. And that’s telling us that there were people caught on the wrong side of this.”
He also notes that the market’s calm had lulled traders into complacency, creating conditions for the sharper reaction once fear returned.
“Every so often, the market needs a reminder that risks are out there. It’s too early to say whether this is, you know, a tidal change or just a rogue wave, so to speak. This is really the reminder that risks are always ever-present. And sometimes the less you perceive the risk, the more they’re lurking.”
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