Bank of America: Recession Will Ravish Markets in Early 2023

• Bank of America economists expect the US to slip into a recession in the first quarter of 2023.
• That will become the dominant story for markets next year, the bank said.
• The S&P 500 could plunge 24% from its current level by the end of the year, strategists warned.

Business Insider first published this story.

Spencer Platt/Getty Images via Business Insider

According to Bank of America, the benchmark US stock index could fall 25% from its current level in a recession.

According to the bank's base case, the US will enter a severe and sustained downturn in the first quarter of the year.

They said in their outlook that companies would have to cut their earnings targets as a result.

The bank's head of US equity strategy said that the market could fall as low as 3000 based on a number of indicators.

The S&P 500's Tuesday close of 3,959 was a 24% plunge.

This year has seen a payback for the boost markets have had from decades of low interest rates and economic stimulation.

There is good news and bad news about the economy in 2023.

According to Bank of America, there will be a recession next year as well. Red-hot inflation, war in Ukraine, and the environmental crisis will cause investors to be scared.

The team led by Subramanian said that the biggest rate shock in history, the most aggressive hiking cycle, the biggest inflationary pressure in 40 years, and rising recession fears, suggest that macro will loom large in 2023.

The stock selloff has seen the S&P 500 plunge in the last four years.

According to Bank of America's most likely investment outlook, the S&P 500 will rise just 1% by the end of the year, for a target of 4,000 points, as the downturn rattles investors' confidence.

The S&P 500 is expected to bottom out at some point in the first half of next year, meaning there could be buying opportunities soon.

The market typically bottoms six months before the end of a recession, so buy in the first half based on our economists forecast.

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