Font size
The fall in stock and bond prices has reduced household wealth by as much as 8 8 trillion in 2022.
Justin Lane / Ipa-Efe / Shutterstock
The stock market had a near-bear experience, which may be the most bullish thing you can say about it.
Friday is his lowest,
S&P 500
The index was down 20% from its high, which would have arbitrarily defined a bear market if it had stopped there. For those whose portfolios are loaded with large tech stocks, this is hardly a push.
Nasdaq Composite,
Which is about 30% below its height.
Such staggering figures make the S&P 3600 7. 7.7% lower than last week’s close — a new bull case, advises Bank of America strategists led by Michael Hartnett. Irresistibly bearish sentiment, including rising world-class equities, speculative-grade corporate and emerging market debt, and exits from declining technological barometers, puts their indicators in a “vaguely opposite buying zone.”
Yet based on history, there are probably a few more months of pain for the bull. The BofA team has seen 19 U.S. equity beer markets over the past 140 years and the 289-day fixed price has dropped an average of 37.3%. If the past prologue, this bear should be below 3000 with the S&P 500 on October 19. Coincidentally the same negative target predicted by the former. Baron’s Roundtable member Felix Zulauf was here last December.
There is a laundry list of reasons for the negative, in addition to the beer market, the index of Everco’s ISI Conference Board’s Leading Indicators indicates a decline, existing-home sales decline, a weak feeling among home builders, truck order slipping and purchases. Managers’ index, an increase in unemployment demand, and the expansion of corporate credit spreads, and a decline in actual retail sales after inflation.
The pressure on retailers was dramatically clear as a massive blow to an array of stocks
Target
(Ticker: TGT), resulting in painful pressure on margins from consumers’ inability to bear all their rising costs.
While rising costs of food, energy and rent are taking a painful toll on less affluent households, declining asset prices are hurting those lucky enough to own shares. Even as home prices continue to rise, the fall in stock and bond prices has reduced household wealth by $ 8 trillion since the beginning of the year, according to a research note by JP Morgan economist Peter B. McCrory, Michael Ferroli. And Daniel Silver. They assume that consumer spending is usually deducted by two cents per dollar reduction in financial assets – not an invaluable sum.
No one has to look far for the reasons for the bear’s return. After governments pumped a total of $ 23 trillion worldwide in 2020 and another $ 9 trillion in fiscal stimulus in 2021, their policies are dramatically reversing this year, dropping $ 2 trillion, according to the BOFA team. Meanwhile, inflation has been at a four-decade high, while growth has stagnated.
This is not the time to be seemingly bullish, but a team of global strategists from BCA Research led by Peter Berezin made that positive pivot on Friday.
True to their Canadian home, strategists are looking to skate where they think the puck is going. Investors need to focus on what the world could be like in six months, they wrote in a client note. Until then, the BCA sees inflation slowing and growth accelerating. The valuation is also now claiming significantly less, with global stocks retracing 15.3 times the forward earnings and the 10-year yield on the benchmark U.S. Treasury note eased to 2.79% on Friday from 2.79% and a recent intraday high of 3.20%.
Yet the tightening of the Federal Reserve policy has just begun, with two more half-point increases at the June and July meetings, a virtual lock, and the central bank’s nearly $ 9 trillion balance sheet contraction has not even begun. In this case, the bull case could actually be BofA’s 3600 target for the S&P 500, although below 3000, consistent with the bear’s past history.
Write Randall W. Forsyth at [email protected]
