Ahead of the Federal Reserve's highly anticipated 75 basis point interest rate hike next week, Wall Street is torn as to where the stock market will go next.
If the Fed tightens interest rates at a time when the economy is showing signs of weakness, it could cause a stock market decline.
Professional investors believe that the Fed needs to ignore stock market volatility and maintain its credibility by continuing to raise rates until inflation shows enough signs of cooling off.
There are lessons from the 70's that premature easing could result in a fresh wave of inflation and market volatility may be a smaller price to pay.
The stock market is going into year-end and where the bulls and bears of Wall Street stand on inflation and interest rates.
This is the first thing. If rates continue to rise, expect a 20% sell-off in the stock market.
The unemployment rate is low and inflation is high, so the central banks should tighten monetary policy. "Anything will flow from that."
A rise in rates from 4.5% to 5% will have a negative impact on equity prices.
There are two A 20% decline in the S&P 500 is possible by the end of October.
"We should see a really sharp adjustment in prices very quickly, given where seasonals are and how far out of line we are historically with where the p/e is," he said.
The monetary policy backdrop indicates that the bear market is intact. With the S&P 500 trading at 19x and the core PCE at 4.6%, we should see the stock market fall another 20% by mid- October.
There are three. The economy and stock market are in trouble.
The credit market's actions are consistent with stock market troubles. "I agree with Scott Minerd's call that stocks can fall 20% soon," Gundlach said on Tuesday.
"You always want to own stocks, but I'm a little on the lighter side, because the deflation risk is much higher today that it's been for." The Fed should raise interest rates by 25 basis points.
This is the first thing. It's time to buy stocks because inflation has peaked.
The June 2022 equity lows should bedurable even for those in the 'inflationista' camp or even the 'we are in a long-term bear' camp.
"August's higher-than-expectedCPI report doesn't mean stocks have to break below the June lows," Lee said, as he reiterated his view that S&P 500 will rally more than 20% to new highs by the end of the year.
There are two Someone who wants to get out of stocks already has.
Everyone that wants to leave the market is out and everyone that wants to be tactical is short. Siegel said on Monday that the surprises are going to be to the upside.
If the Fed says rates will go up, that would be a mistake. I think they're going to look at the economy, and I hope they're aware of what's happening on the ground.
There are three. As inflation resolves itself, the stock market will go up.
With just one month before the US elections, it would be a mistake for the Fed to increase risk of a hawkish policy error.
"Our expectation that the global economy will stay out of recession, increasing fiscal stimuli, and still very low investor positioning and sentiment should thus continue to provide tailwinds for risky assets, despite the more hawkish central bank rhetoric recently," he stated.
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