Following one of the most volatile years in recent memory, Wall Street strategists have turned bearish on stocks, with most forecasting a downturn in the S&P 500 well into next year, reports an article in Bloomberg. Those predictions have gotten worse as the year as rattled on.
Still, there’s a broad gap between forecasts, with some predicting a 10% rise in the S&P 500 and others foreseeing a 17% drop by this time next year. The current debate over whether the Fed will continue tightening or begin to ease in the New Year, and if a recession will occur, has divided Wall Street, the article maintains. With the second straight year of losses, it’s easy to see why so many of the predictions for next year are dire. And even in its final weeks, 2022 continues to be volatile: those buying the dip are watching their recently-purchased shares drop even lower, nearly every major asset has seen losses, and once-reliable hedges are proving insecure, the article contends.
Of course, no one knows when the market will actually hit bottom. Among the strategists cited in the article, Binky Chadha of Deutsche Bank predicts that stocks will bottom out in the 3rd quarter to coincide with the start of the recession, and then rebound by year’s end. Meanwhile, Mike Wilson at Morgan Stanley—ranked the best portfolio strategist by Institutional Investor’s survey—sees the bottom happening in the first quarter. The Fed will ease off their rate hikes, and while the economy will weaken, a deep recession won’t occur. That wide array of opinions doesn’t help managers who are trying to time the reentry of the cash reserves they’ve spent years building into the market. But all those views also give investors a broad spectrum of outcomes to imagine and makes the market not as susceptible to unwelcome surprises, since the market is already factoring in all the possibilities, Aneet Chachra of Janus Henderson Investors told Bloomberg. However, “I don’t envy the task of making these forecasts,” he added.
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