Fed Intervention Expected to Stabilize S&P 500 Amid Market Volatility

• Bulls recommend buying on dips in the S&P 500.
• Corporate earnings growth is slowing.

Strong U.S. labor market data failed to reassure investors. Anticipated mitigation of AI‑driven job losses initially helped curb equity sell‑offs, yet the S&P 500 and Nasdaq‑100 have settled near three‑month lows. The critical question now is whether the collapse on Black Thursday, November 5, represents a temporary blip or the start of a prolonged downtrend for AI‑related stocks.

One of the key principles of investing is to let your rules, rather than media headlines, make decisions for you. The bulls who called for buying the dip in the S&P 500 continue to insist they were right, despite the broad market index’s dramatic slump. Morgan Stanley is urging investors to add risk to their portfolios over the next 2–3 weeks. Yardeni Research maintains that the AI bubble has not burst; it has simply lost some air. There is no economic catastrophe on the horizon, and now is the time to buy shares.

From a structural perspective, the market has entered a down‑grade phase. Even as index prices retreat, breadth and strength indicators have improved consistently since early October. FactSet’s second‑quarter earnings also hit a historic high—corporate profits now account for double the pre‑1990s share of GDP.

The Federal Reserve may provide support for the S&P 500 over the medium term. Fed Chair Kevin Warsh emphasizes that markets could absorb additional bearish pressure, altering the pace of tightening that derivatives markets anticipate. A deeper sell‑off could constrain financial conditions without requiring the monetary tightening currently on the horizon. Instead of a “Trump put,” the Fed put could re‑enter the equity index, provided U.S. inflation does not accelerate further.

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