The S&P 500 Index has fallen 21% since the beginning of the year. The last time it fell that much during the first half of the year was in 1970, Bloomberg calculated
The first half of 2022 could be the worst for the S&P 500 index since 1970, writes Bloomberg. The S & P 500 index, which includes shares of the 500 largest U.S. companies by market capitalization, has fallen 21% since the beginning of the year amid expectations that high inflation and tighter monetary policy of the Federal Reserve will lead the U.S. economy into recession. The last time the S&P 500 index fell that much during the first six months of the year was more than 50 years ago, the agency estimated.
What is the average stock price of the s&p 500?
U.S. inflation soared to the highest levels in more than 40 years this year, hitting 8.6 percent in May with a target of 2 percent. To keep inflation in check, the Fed, the nation’s central bank, raised interest rates by 75 basis points on June 15. This was the first time in 28 years that the rate was raised by 0.75 basis points at once. The Fed has signaled that it plans new hikes.
At the beginning of last week, the S&P 500 index went into a bear market phase. A bear market is considered to occur when stocks lose more than 20% from their previous peaks. The S&P 500 made a historical high of 4,818.62 points on January 4. On Monday, June 13, it closed at 3,749.63, 22.18% below the high.
According to Societe Generale Bank strategist Manish Kabra, the decline is not over yet. “We still haven’t seen a true bottom for the stock market,” Kabra believes. A 1970s-style inflation shock could cause the S&P 500 Index to fall about 33% more from current levels to 2,525 points, the expert predicts. This will occur against a backdrop of stagnation in the U.S. economy and a run-up in inflation. On June 22, as of 19:50 Moscow time, the value of the S&P 500 index was 3,774 points.
Cabra thinks a milder “typical” recession scenario would see the s&p index price drop to 3,200 points, down nearly 15% from its close on Tuesday, June 21. That is, the outlook for the S&P 500 stock price today is rather pessimistic.
The key takeaway from the 1970s situation is the risk that if investors brace for high inflation going forward, stock markets will begin to focus on the real, rather than nominal, earnings per share rate, which is likely to turn negative this year, Societe Generale warned. It will lead to further decreases in the American stock indices.
Stock price chart s&p 500: forecasts
What will be the list of s&p 500 companies and stock price? Michael Wilson of Morgan Stanley also thinks that the S&P 500 should drop another 15-20%, to about 2,900 points, for the market to fully reflect in prices the scale of the coming economic downturn.
The expert at Morgan Stanley considers that further collapse of the U.S. stock market is inevitable. Even if the U.S. economy manages to avoid a recession, the stock market will still fall, he believes. In this scenario, the S & P 500 index is likely to fall another 7-10% – to about 3400-3500 points, as corporate earnings decline from inflation.