The US stock market has rebounded, but don't expect a big surge by the end of the year?

The U.S. stock market seems to be stabilizing after a recent wave of sell-offs, even though a temporary outage at the Chicago Mercantile Exchange (CME) caused chaos in early trading, it did not completely disrupt the market's recovery pace.

So, can the U.S. stock market maintain its upward momentum by the end of the year?

Bloomberg macro strategist Simon White's latest analysis points out that the upward momentum within the U.S. stock market is waning, coupled with a significant reduction in buyback activity, making the possibility of a strong rebound by year-end extremely slim.

He believes that stripping away short-term noise, from the deeper logic of factor rotation, the upcoming market performance of U.S. stocks can only be described as "uninspiring."

Buyback "Engine" Stalls: The Aftermath of Tech Giants' Capital Expenditures

As the saying goes, "the duck knows when the spring river warms," the switch in market style is often the most honest reflection of capital flow.

Simon analyzes that, year-to-date, the best-performing factors in the U.S. stock market have been "momentum" and "trading." The former represents the basket of stocks with the strongest performance over the past year, while the latter points to the stocks with the highest trading volume—against the backdrop of a surge in buybacks in 2025, these stocks were once the darlings of capital.

However, the wind has changed in the past month. From the latest factor performance, the "value" factor has surged to the top; followed by "momentum"; while the previously leading "trading" factor has plummeted to the bottom.

Based on this, Simon infers that "corporate buybacks," one of the core drivers of this bull market, are rapidly retreating.

Simon further analyzes that, although November and December are typically peak seasons for buybacks based on seasonal patterns, whether this tradition can continue in 2025 is debatable. The reason is that the tech sector has been the main force in this year's buyback market, but after a year of aggressive capital expenditures, the balance sheets of the giants are no longer as "ample" as at the beginning of the year, thus limiting the tech industry's ability to continue large-scale buybacks of their own stocks by year-end.

When the "Momentum Factor" Fails to Outperform the Market

If the buyback engine stalls, can pure market momentum support the year-end performance? The data does not provide an optimistic answer.

Currently, there is a dangerous technical divergence in the market: the pure "momentum factor" has begun to underperform the S&P 500 index on a quarterly basis.

Simon White analyzed two market states:

• Positive mechanism: When the momentum factor outperforms the market, the market rebound is often healthy and strong.
• Negative mechanism: When the momentum factor underperforms the market—as we have seen in recent months—it often corresponds to flat index returns or even negative returns.

Looking back over the past 25 years:

• During the "tailwind period" when momentum outperformed the market, the average daily return was 0.35%;
• Whereas during the "headwind period" when momentum underperformed the market, this figure plummeted to 0.22%;
• As a benchmark, the long-term overall average daily return of the market is 0.30%.

Clearly, the current market is in a "headwind period" with low returns However, Simon also believes that, from the current perspective, investors do not need to be overly pessimistic, as overall market liquidity remains abundant, providing a solid bottom for U.S. stocks, and the risk of a crash or deep correction is not currently anticipated.

However, having support at the bottom does not mean there is space above. Under the dual constraints of weak momentum factors and limited corporate buyback intentions due to capital expenditure restrictions, it is probably unrealistic to expect U.S. stocks to stage a "fireworks show" type of surge by the end of the year.

Risk Warning and Disclaimer

The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at one's own risk