Short-term volatility risk remains unsolved in the S&P 500 index, Wall Street warns buyers to be cautious when buying at low prices.

Despite signals of openness from both China and the United States in trade negotiations, the S&P 500 index rebounded by 1.6% on Monday, recovering over half of the losses from last Friday. On that day, the index plummeted by 2.7% due to escalating tariff tensions, marking the largest single-day decline since April. Despite this, market observers from institutions such as Morgan Stanley, Evercore ISI, and J.P. Morgan still believe that investors eager to "buy the dip" should remain cautious, as short-term volatility risks have not dissipated. High valuations, combined with risks of a U.S. government shutdown and trade uncertainty, could amplify economic losses. Peasley Naeradini, head of Simplify Asset Management's diversified asset solutions, pointed out that political, financial news, and Federal Reserve policy in the final months of 2025 may exacerbate market sensitivity. Currently, the "market's reaction to news is more intense than usual, reflecting fragility". Data shows that the S&P 500 index has not experienced a 5% pullback for 97 consecutive days, far exceeding the long-term average of 59 days. As the index enters its fourth year of a bull market, the pressure for a pullback is accumulating. Michael Wilson, a strategist at Morgan Stanley, believes that although a pullback may be seen as a long-term buying opportunity, short-term risks still exist - if trade tensions between China and the U.S. are not resolved by the deadline in November, the S&P 500 could fall to 5800 points, a 13% drop from Monday's closing price. J.P. Morgan's global market intelligence director, Andrew Taylor, maintains a bullish stance but warns investors to be cautious of high valuations, concentrated positions, and the difficulty of achieving a trade truce. President Trump's threat to impose 100% tariffs on Chinese imports last Friday disrupted market calm, but the White House expressed openness to reaching a trade agreement on Monday. China's Ministry of Commerce also urged further negotiations to encourage buying opportunities for investors. Julian Emmanuel, Chief Equity Strategist at Evercore ISI, mentioned that the selling from last Friday has not completely ended. Although a Xi-Trump meeting is expected by the end of the month, increased uncertainty may lead to active fund selling. He noted that the rare earth dispute has become a catalyst for the pullback, and the S&P 500's 36% gain since its low point in April has put it in an overbought state, as September and October are historically high volatility periods. On the technical side, Mark Newton, Head of Global Technical Strategy at Fundstrat, observed that last Friday's selling pushed the S&P 500 back to a key trendline support, paving the way for a 5% pullback for further gains at the end of the year. In the options market, the Chicago Board Options Exchange Volatility Index (VIX) closed at 21.66 last week. Mandy Xu, head of market intelligence at Cboe, stated that by historical standards, it is still "quiet", but the demand for "right tail hedging" is increasing, indicating that the market is starting to guard against extreme downside risks. Thomas Santon, founder of Hedge Fund Telemetry, emphasized that computer strategies, hedge funds, and retail investors are heavily focused on large tech stocks, and a market shift could lead to a painful reversal, with leverage ETF assets expanding the risk. He concludes that "investor sentiment remains high, complacency abounds, and the risk of a market event is still very high."