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S&P 500 year-end target revised by banks after a bear market bounce

Aggressive tightening by the Federal Reserve in an effort to combat inflation might further harm corporate earnings.

S&P 500 year-end target revised by banks after a bear market bounce
The benchmark S&P 500 faces valuation problems that may linger well into 2023.

The most recent bear market rally happened in June 2022. From the lows around June 15, the market rallied till August 15 and since then kept sliding down. While September saw the stock values plummet hugely, the start of October has been equally volatile.

But, many analysts are of the view that another rally may be near or already started. However, most investment bankers are calling for another bottom for the market and expect stock prices to fall further before making a bottom.

S&P 500 is trading around the crucial level of 3600. These leading banks are of the view that US stocks aren’t fully reflecting the challenges facing the US economy. Some of the largest banks on Wall Street are not supporting this stock market rise.

The S&P 500 Index has not yet achieved its absolute low, according to HSBC Holdings Plc, and the concerns of rising interest rates on earnings and values are still not completely reflected in US equities prices.

Also Read: 3 strong reasons to suggest that the bear market is far from over

According to HSBC, aggressive tightening by the Federal Reserve in an effort to combat the highest US inflation in four decades might further harm corporate earnings and, in turn, share values. The benchmark S&P 500 faces valuation problems that may linger well into 2023, with the most downside in the coming months coming from declining profitability, endangering a drop in the S&P 500 to 3,200 in the fourth quarter.

The S&P 500’s year-end target was changed by Goldman Sachs Group Inc. and Bank of America Corp. from 4,450 to 3,500 in 2022. It contends that a change in the forecast for rising borrowing costs will have an impact on US equity prices. On the basis of a higher-rate assumption, Goldman reduced its 2022 projection for the index from 4,300 to 3,600 last month.

Also Read: 5 key factors being closely watched by global equity investors

The strategists at Credit Suisse decreased their S&P 500 year-end target by 10% to 3,850, noting the likelihood of weaker corporate earnings growth in 2023. One of Wall Street’s most well-known stock market cynics, Mike Wilson of Morgan Stanley, has said that US stocks are in the midst of a bear market. He predicts that the S&P 500 will eventually reach a low of around 3,000 to 3,400 either later this year or early next.

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First published on: 19-10-2022 at 05:38:01 pm