Major Wall Street firms warn that the ongoing market selloff could get worse if the economy goes into a recession.
If the economy falls into a recession, the strategist predicts that stocks will fall by another 24%.
The Federal Reserve pledged to keep raising interest rates until prices come back down after major retailers warned about inflationary pressures eating into profits.
The S&P 500 could plunge to 3,000 if the economy falls into a recession in the near future, which would amount to a roughly 24% drop from the index's current level of around 3,900, according to a recent note fromDeutsche Bank.
He has a price target of 4,750 for the S&P 500 and predicts a relief rally by year-end, but there are risks.
If the economy falls into a recession, Goldman's David Kostin says the market could lose more than 20% of its value over the next two years.
According to historical data, the S&P 500 has fallen by a median of 25% and an average of 30% in 12 recessions since World War II.
Bank of America strategists warned of a worst case scenario for stocks where the S&P 500 falls because of slow economic growth and high prices.
Inflation is proving sticky and the Fed's forward guidance is for a rate hiking cycle that has historically ended in recession more often than not, with the Fed acknowledging and accepting this risk.
The recent market selloff, coupled with the prospect of aggressive rate hikes from the Federal Reserve as it tries to combat inflation, has raised recession fears. He puts the odds of a recession at over 50% within 24 months, higher than some of his peers.
According to a recent note by Bank of America's equity and quant strategist, investors should be wary of the recession risks in markets. The current market conditions are reminiscent of the 1999-2000 dot-com bubble, which was characterized by an acceptance of the unthinkable.
The S&P 500 is near a bear market territory.
The stock market selloff continues as major retailers are concerned about rising cost pressures.
After Powell said the Fed should keep raising rates, the stock market jumped 400 points.
WarrenBuffett's $51 Billion Stock Market Shopping Spree: Here's What He's Buying
All Rights Reserved © 2024
