Stocks recovered from the selloff, but even bulls are warning of more volatility

Stock markets around the world edged higher on Tuesday, marking a temporary recovery from volatility led by a strong sell-off in global technology stocks.

Friday saw US stocks come under pressure, led by a sharp decline in chip stocks. Negative momentum eased in Asian trade, while European tech stocks also took a hit. It came after a downbeat earnings report from Broadcom sparked a rout in AI-linked stocks.

On Tuesday, global stocks appeared to be recovering from the sell-off. US stock futures were last seen trading higher, with futures being dominated by technology Nasdaq 100 it adds 0.7%.

European technology stocks were on track for their second day of gains, with the region The Stoxx 600 The technology index is giving back part of the losses suffered on Friday, and South Korea is tech-heavy Kospi The index jumped more than 8% on Tuesday following two days of losses.

While many investors remain bearish on stocks, some turbulence is expected on the journey to big gains.

Robert Edwards, Chief Investment Officer of Florida-based Edwards Asset Management, said the tech stock’s pullback is “a gift to investors.”

“We’re always buyers on dips,” he said, describing the market’s movement as a “sawtooth pattern.”

“The sharp drawdown has been met with strong buying because investors, despite the noise, know that strong fundamentals, including strong revenue and earnings growth, are still in place,” he said. “This is what bull markets look like, with violent ups and downs, which can be uncomfortable, but the overall trend is up.”

Edwards Asset Management, which manages assets worth 3 billion dollars, expects S&P 500 to reach 7,700 points by the end of the year – representing a rise of about 4% from Monday’s closing price. Edwards said that while his forecast suggests most market gains have already been priced in this year, he expects continued volatility to create “more buying opportunities.”

“These buying opportunities may come from an upcoming correction of 7% to 12% caused by uncertainty over new Fed Chairman Kevin Warsh and further delays in opening the Strait of Hormuz, where oil remains high long enough to revive inflationary concerns,” he said.

Edwards also noted that while the upcoming big IPOs are “the adrenaline rush of a bull market that’s really kicking off,” signs of the “euphoria” that usually means the market’s ceiling had not yet been reached.

“We have started rushing to buy things that need to be boarded,” he said. “Our message to investors is to stay invested, stay organized, and don’t rush into a pullback. The benefits are real, the cash on hand is huge, the exciting IPOs are just starting, and the big tailwinds are ahead – Hormuz reopening, oil falling, and the Fed tightening. This is where big runs are born. Volamission is the volamission.

In a note on Tuesday, Anthony Willis, senior economist at Columbia Threadneedle Investments, said the recent market weakness “looks more like a double whammy than a significant break in the growth story.” However, he noted that the selling pressure serves as a reminder that “firm fundamentals do not end volatility.”

“Friday’s sell-off in tech, followed by weakness in many parts of Asia, suggests that markets are re-evaluating the previously relaxed backdrop,” he said. “The question is not whether growth has slowed, but whether markets are adjusting to a strong mix of strong data, higher expectations and continued sovereign risk.”

Willis noted that, prior to the selloff, AI optimism had fueled a rally that saw U.S. equities rise for nine consecutive weeks. But he pointed to stronger-than-expected U.S. jobs data on Friday — prompting markets to reconsider the Federal Reserve’s policy approach — and a broader stance and questions about funding needs for the next phase of the AI ​​cycle, as drivers of the shift in sentiment late last week.

“When markets rally hard, high expectations and a bullish stance can make them vulnerable to disappointment. That doesn’t necessarily mean a broader cyclical change. It may just mark a decline in prices from overly optimistic levels,” Willis said.

“Our broad vision is still constructive. The message is discipline, not layoffs,” he added. “The case for risk assets is still dependent on strong growth and earnings, but selectivity is more important when valuations are inflated and the large backlog is less straightforward.”

In a note sent to clients on Monday evening, Citi analysts said that following the recent decline, the position in US equity markets is “increasingly healthy” and balanced.

Noting that Friday marked the biggest one-day decline for the Nasdaq Composite since April 2025, Citi analysts pointed to hotter-than-expected labor market data that bolstered expectations of a potential Fed hike later this year.

Citigroup separately raised its year-end forecast for the S&P 500 on Monday to 8,100 from 7,700, which is about 10% for the index, which has gained more than 8% since the start of 2026.

But Citi analysts warned on Monday evening that last week’s trading had created a “consolidated market” that could be vulnerable to disappointing headlines.

“While the $14.7 billion in new shorts marked the largest weekly short structure seen during the year, the simultaneous addition of $4.78 billion in new shorts – with no evidence of long-term termination – highlights two distinct camps: macro-driven bears and investors who retain strong confidence in buying AI-driven pullbacks,” they said.

“With 72% of Nasdaq Still profitable and the size of the position at extreme levels, the market remains vulnerable to volatility, where negative stimuli can cause acceleration of long-term liquidation. In particular, if this week’s technical earnings announcements disappoint, this could result in an imminent long-term collapse. “