U.S. soft landing case is a 'make or break' moment, strategist warns.

• According to Ron Williams, the chief investment officer at RW Advisory, the S&P 500's 5,200 level will determine whether the current rebound will continue or if it will decline further.
• The consensus soft landing view is being challenged by a "bull trap squeeze" in U.S. markets, where many investors hold leveraged, bullish positions.

One strategist predicts that the U.S. economy is at a "make or break" point, with the consensus view of a soft landing reaching a critical test level.

Ron Williams, the chief investment officer at RW Advisory, stated on CNBC's "Squawk Box Europe" that the 5,200 mark would determine whether the current rebound would continue or if the market would decline further.

Since last Friday, U.S. stocks have experienced significant fluctuations, with a sharp decline followed by a rebound on Thursday. As a result, the S&P 500 had its strongest session in 2022, reaching approximately 5,310.

The two primary factors contributing to market instability are the Japanese monetary policy and the uncertainty surrounding the condition of the U.S. economy, which has led to speculation about a possible recession. Initially, investors were alarmed, but later reassured by two sets of employment data.

Our base case at RW Advisory is that a top is in, and this trend is expected to continue until 2025.

"Since the beginning of the year, our thesis has been a turning point in behavior, which has now reversed. However, this essentially means that we are facing a bull trap squeeze, where there are many leveraged, optimistic views on the back of a consensus soft landing view, which is now a make-or-break situation."

He stated that we could achieve a correction of over 10% to reach or exceed 15% with a focus on monitoring the key level of 5,200.

A bull trap is a selling point where bullish consensus is proven wrong, resulting in investors losing money on long positions after buying based on a buy signal.

"We were seeking a dramatic outcome during the last tactical period as the markets faced intense pressure due to a triple whammy of extreme momentum, rotation fragility, and cycle asymmetric risk," Williams stated.

Williams stated that the markets had become more overextended in terms of the original three factors, including excessive momentum, rotation fragility, and frothy tech in Q1, when the market sold off, bounced, sold, and then continued to gain in April.

"We experienced a rapid shift into value that was not sustainable, which served as the final catalyst. Since then, a series of other factors have caused the market to decline."