US stocks rebound sharply from a major decline; can Trump's 50,000-point prediction come true?

The U.S. stock market rebounded on January 22nd (Thursday) after experiencing a significant decline the previous day. The three major indices all rose: the Dow Jones Industrial Average increased by 311.32 points (0.63%), the Nasdaq Composite gained 213.91 points (0.92%), and the S&P 500 rose by 47.3 points (0.69%). Behind this rebound, there was both a recovery in market sentiment and the influence of Trump’s optimistic predictions.

From Sharp Drop to Rebound: Rapid Shift in Market Sentiment

The Massive Drop on the Previous Day

In comparison, on January 21st (Wednesday), U.S. stocks experienced a notable decline. The Dow fell by 1.76%, the S&P 500 dropped 2.06% (its largest single-day decline since October), and the Nasdaq declined by 2.39%. The main trigger for this decline was Trump’s renewed threat to impose tariffs on eight European countries, reaffirming a tough stance involving Greenland, which sparked concerns over a global trade war. During this period, major tech stocks all declined: Nvidia fell 4.38%, Tesla dropped 4.17%, and Oracle declined 5.85%.

The Speed of Sentiment Reversal

From Wednesday’s panic to Thursday’s rebound, the turnaround took less than 24 hours. This rapid shift indicates that market participants reassessed the previous day’s decline. Some analysts believe that Tuesday’s sell-off may have overreacted to tariff threats, and Thursday’s rebound represents a rational market correction after digesting the risks.

The Dual Effect of Trump’s Remarks

Optimistic Predictions Boost Confidence

On January 21st, Trump stated that the recent stock market correction was just a minor issue and that the market would continue to surge. He predicted that the Dow could reach 50,000 points in a relatively short period, even doubling to 100,000 points. Although these comments lack concrete basis, they were issued after the market decline and effectively stabilized investor expectations. Currently, the Dow stands at 49,388.55 points, just a step away from 50,000, further reinforcing expectations of a short-term rebound.

Uncertainty in Policy Expectations

It is important to note that Trump’s tariff threats and optimistic predictions are closely linked in time, reflecting the current policy uncertainty facing the market. When digesting policy signals, markets often overreact, with a pattern of falling first and rising later becoming common.

Independent Trends in Cryptocurrency

Divergence from U.S. Stocks

Notably, Bitcoin’s performance contrasts sharply with that of U.S. stocks. According to the latest news, BTC has declined for the seventh consecutive trading day, falling near $88,000, potentially setting the longest losing streak since May 2023. This indicates that the cryptocurrency market remains weak even as U.S. stocks rebound, behaving more like risk assets.

Structural Market Divergence

This divergence reflects the complexity of the current market. Traditional financial markets (U.S. stocks) and cryptocurrency markets respond differently to the same events, possibly due to differences in participant structures, risk preferences, and liquidity characteristics across the two markets.

Global Market Interactions

A-shares’ Simultaneous Rebound

Driven by the rebound in U.S. stocks, A-shares also showed positive performance. On January 22nd, A-shares opened lower but then rose, with the Shanghai Composite Index once again surpassing the 4100-point mark, and the STAR Market 50 Index leading the gains with a 3.5% increase. This indicates that the linkage among major global stock markets remains significant.

Offshore RMB Stabilizes

Meanwhile, the offshore RMB exchange rate stabilized around 6.95, further boosting market sentiment. This synchronized rebound across multiple markets provides a certain foundation for subsequent market trends.

Key Observations for Short-term Trends

Sustainability of the Rebound

From a technical perspective, all three major U.S. stock indices opened with gains exceeding 0.6%, indicating that the initial momentum of the rebound is relatively strong. However, whether this can be sustained depends on whether new positive or negative information emerges later.

Risks to Watch

Trump’s tariff policies remain an uncertain factor for the market. If new tariff threats or trade disputes escalate, the market could decline again. Additionally, the surge in U.S. Treasury yields (notably, the previous day, the 30-year Japanese government bond yield surged by 26 basis points) is also worth monitoring, as it may impact global liquidity.

Summary

The rebound in U.S. stocks on Thursday marks a rapid recovery of market sentiment, but whether this rebound evolves into a sustained upward trend remains to be seen. Trump’s prediction of 50,000 points has boosted market confidence, yet policy uncertainties still exist. The divergence between the continued decline in cryptocurrencies and the rebound in U.S. stocks reflects the complexity of the market structure. Investors need to balance optimism with risk awareness, closely monitoring policy developments and global liquidity changes. In the short term, whether U.S. stocks can break through previous highs will be a key factor in judging future movements.