- The stock market is in for a disappointing few months.
- Two investment veterans told BI that stocks are likely to post flat or negative returns by the end of the year.
- The company's stock price is already skyrocketing, and there isn't much to push it higher.
With a tough summer ahead for investors, Wall Street veterans who spoke to Business Insider predicted that the market is likely to level off or enter a correction in the coming months.
David Morrison, a market analyst at Trade Nation, said the recent rally in stocks has seen the S&P 500 and Dow Jones Industrial Average both near record highs as inflation eased in April. I'm skeptical about that.
He warned that rising stock prices are themselves a problem, as they are already very expensive and it is hard to imagine the market going up from here. He expects the benchmark index to undergo multiple large corrections of at least 10%, ending the year at around 4,500.
“The next move will be down, not up,” Prime Minister Scott Morrison said.
This view is at odds with the growing number of bulls in the market who see an eventual rate cut by the Federal Reserve as a strong positive catalyst.
However, Prime Minister Scott Morrison believes the Fed's first rate cut could easily be delayed for another three months. That means no rate cut this summer, or perhaps no rate cut at all this year. He said one high inflation rate would be enough to completely eliminate the Fed's prospects for rate cuts this year.
“Investors are suffering a lot of FOMO and are concerned that the upside is in the process of being blown out in an echo of the movements seen in early 2020,” Prime Minister Scott Morrison told BI, pointing to pandemic stocks. He said. crash. “I think the air is pretty thin here. While there are no obvious triggers to sell, it's hard to see what could significantly push the stock higher from here.”
Will McGaw, investment director at Prime Capital Investment Advisors, expects the S&P 500 to end the year roughly flat to where it currently trades. Stocks are already so expensive that the Fed has no immediate need to lower interest rates. He noted that interest rates have historically hovered between 4% and 5% without triggering a recession.
Regarding interest rates, he said, “Everyone is getting used to the status quo and the way it is,” suggesting that a significant rate cut is not an option.
Both Mr Morrison and Mr McGough warned that investors would face a number of obstacles to stock market gains in the second half of this year.
Prime Minister Scott Morrison has said there is a strong chance the US economy will fall into recession over the next year. He puts the probability of a hard landing at about 60%, similar to the New York Fed, which sees a 50% chance the economy will fall into recession within the next 12 months.
Many recession indicators are already sounding alarm bells for the US economy. Prime Minister Scott Morrison said the 2-10 Treasury yield curve, the bond market's notoriously inaccurate recession indicator, has been inverted since July 2022, making it one of the biggest indicators that a recession is approaching. Said to be one.
Economic growth has already begun to slow. GDP slowed to just 1.6% in the first quarter, while key sectors of the economy such as manufacturing have contracted for months in a row.
“The situation is going to be even more volatile going forward, and I think we need to be prepared for some very severe downturns along the way,” Prime Minister Scott Morrison said.
Although McGough believes a recession is unlikely, he does see more volatility in the second half of the year, especially ahead of the presidential election in November.
“Political instability will itself trip up stock market volatility,” McGaw warned.
Other strategists are also warning of a bumpy road ahead for stocks. More extreme forecasters predict a market crash of as much as 65%, as the stock market mirrors past bubbles.
“Enjoy yourselves this summer. You'll probably be back with no materials moving either way,” McGaw said.
