S&P 500 Could Drop Another 16% Unless The Fed Slashes Interest Rates
According to the analysts at UBS, the S&P 500 index, which tracks US stocks, could drop up to 15% before forming a bottom within the next 9 months. However, this will require the Fed to slash the interest rates and move away from the current aggressive policy.
UBS is a famous bank from Switzerland and continues to provide accurate market insights... This time, they believe that the factors which will push the stocks even lower are weak earnings and weak growth. Furthermore, a decrease in the US interest rate somewhere in 2023 will help the index form a bottom.
So based on the UBS views, it seems that S&P 500 could find a bottom near the 3200 level somewhere in the 2nd quarter of 2023. And by the end of 2023, the index would be somewhere around 3900.
Right now, the S&P 500 index is trading near the 3800 level, which is a lot higher than the forecast made by the UBS for 2023. So based on that analysis, it seems that the S&P 500 would still be pretty much at the same levels even by the end of next year.
S&P 500 Index - Already Down By 20%
Since 2022, the benchmark index is already down by 20% due to the aggressive policy of the Fed. Furthermore, poor earnings season from the big tech and fear of recession is also pulling the S&P 500 down.
Keeping the current economic situation in mind, the analysts at UBS believe that slow economic growth will continue to put pressure on the stocks. Furthermore, the GDP value for 2023 is expected to be around 2.1% which is a small number considering the historical performance.
It seems that we are fast approaching the scenario of a global recession, and the USA will play a key part in it.
That's why the analysts believe that the growth in the next two yers (2023 & 24) will be close to zero. As for the recession, it is expected to start in the year 2023.