According to Bank of America strategists, the US stock market is preparing for a new decline before finally recovering in the second half of the year when economic conditions stabilized.
In a memo led by strategists led by Michael Hartnett, investors predicted that the S&P 500 would drop nearly 10 percent to 3,600 points before rising 17% to 4,200.
“Trading during periods of economic and interest recession requires patience,” experts said, adding that the “painful trades” will continue until the Fed signals a “Goldilocks peak” in interest rate projections, bond yields and credit spreads, which defines a stable economy that is neither too hot nor too cold.
Global equities had soared earlier this year on rising optimism as China reopened, inflation cooled and central banks would adopt a less aggressive approach to tightening.
Strategists prefer European and Asian shares to the US
Still, strategists are increasingly opting for European and Asian shares over their US counterparts, given the higher interest rates. Hartnett said the performance of European equities against the US last week marked “the beginning of an era”, while Goldman Sachs Group peers said the Chinese stock rally has more room to continue.
According to a different note from Citigroup Inc. that cited EPFR Global data, global equity funds received $7.2 billion in inflows in the week up until January 11.
“Markets may have good reasons for seeing the glass half full and rejecting the hawkish pronunciation of inflation,” Barclays strategist Emmanuel Cau wrote in a note Friday. used his words.
The latest US numbers reinforce the view that inflation continued to slow in December and price pressures peaked, putting the Fed on the path of slowing the pace of rate hikes again.
“S&P 500 utility revisions point to a hard landing,” although the market is pricing in a soft landing, Goldman Sachs strategists led by David Kostin said in a memo late Thursday. They said that if there is no recession as the group expects, the increase in benefits per share in the S&P 500 will remain flat this year.
