From BigGo Finance · BigGo Finance · · 1m 20s
Wall Street Warns of 8% S&P 500 Slide Before Year-End Rally
Morgan Stanley predicts S&P 500 could drop 8% before year-end rally.
In brief
Morgan Stanley predicts S&P 500 could drop 8% before year-end rally. Morgan Stanley strategists warn S&P 500 may fall to 7,100-7,200 before rebounding to 8,000 by year-end. Originally reported by BigGo Finance.
S&P 500 Drop Forecast
Morgan Stanley strategists predict S&P 500 could fall to 7,100-7,200, an 8% decline from current levels.
“We think the correction that began in June is now in its final stages”
Correction Progress
84% of S&P 500 members trade at least 10% below their all-time highs.
“roughly 84% of S&P 500 constituents are trading at least 10% below their own all-time highs”
Three Hurdles
AI spending doubts, midterm election uncertainty and tighter financial conditions from rising yields.
“Three near-term hurdles are cited: AI spending doubts, midterm election uncertainty and tighter financial conditions from rising yields”
AI Capital Spending
Investors question hyperscalers' returns on massive capital spending and funding costs.
“the artificial intelligence trade has stumbled as investors question whether hyperscalers' enormous capital spending will earn adequate returns”
Midterm Election Impact
S&P 500 historically rebounds 8% in three months after midterms.
“the S&P 500 has gained an average of 8% in the three months following midterms”
Tighter Financial Conditions
Fed rate hikes and higher energy prices tighten financial conditions.
“rising yields tighten conditions without any additional Fed action”
Fed Rate Decision
Fed held rates at 3.75%-4% with two dissents for a hike.
“The Fed delivered its decision on Wednesday afternoon, holding the benchmark rate at 3.75% to 4%”
GDP and PCE Data
GDP and September PCE data due Thursday for market analysis.
“Thursday's GDP and September PCE data come next”
S&P 500 Levels
S&P 500 closed at 7,722.60, 1.2% below record high.
“At Tuesday's close the S&P 500 stood at 7,722.60, about 1.2% below the record close”
Semiconductor Pressure
Semiconductor stocks down 10-15% below current prices.
“about 96% of semiconductor stocks have fallen at least that far”
Recession Timing
Economic contraction requires extended output decline, not single month downturn.
“A recession, properly defined, requires an extended contraction in output rather than a bad month on Wall Street”
Investment Outlook
Morgan Stanley expects S&P 500 to rebound to 8,000 by year-end.
“the bank still expects the benchmark to finish the year at 8,000”
The bottom line
Morgan Stanley strategists warn S&P 500 may fall to 7,100-7,200 before rebounding to 8,000 by year-end.
