The Bank of America has announced on Monday that the S&P 500 is now in a bear market, warning investors that they will be in misery for a while.
The Federal Reserve has raised interest rates again, increasing the risk of volatility in stock prices. The Fed is expected to hike 75 points on Wednesday, which is significantly higher than the expected 50 points hike.
CPI’s inflation report on Friday indicated no signs of slowing down, and today’s hot numbers are only making things worse.
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The Bank of America isn’t alone in thinking that we’re close to the bottom for stocks. Others shared similar sentiments with them, and say it may not be until inflation prints its highest price yet again before things start improving.
“Wall Street sentiment is dire but no big low in stocks before big high in yields and inflation,” said the Bank of America. “The latter requires uber-hawkish Fed hikes in June and July.”
Global growth optimism is at its lowest point in 14 years, and corporate profit outlooks are the worst since 2008. This can be attributed to a decline of global economic activity which has been caused by inflation reaching unprecedented levels, causing ripples of ominous sentiments on Wall Street.
The bear markets of the past have shown a V-shaped recovery, with prices dropping steeply in late summer and then making their way back up. The indicator that is being used here seems to indicate there could be more pain ahead for investors who buy stocks when they’re at low points like this one right now.
Data was analyzed by Chris Murphy from Susquehanna International Group, who found some interesting statistics about 12 bear market sell-offs since 1945.
Chris Murphy of Susquehanna International Group analyzed all 12 bear market sell-offs that occurred through the decades.
“Looking at the other 12 bear markets, we see that on average, after the SPX enter bear market territory, it continues to fall another 14%, taking 103 trading days before reaching a bottom,” said Murphy.
The S&P 500 is still far from its all-time high, and a similar decline could send it down to 3,250.
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