Wells Fargo (NYSE:WFC) head of strategy Chris Harvey said he expects the S&P 500 to correct 10% in the next three to six months, bringing it to about 3,700 points, close to its November lows. Wells Fargo maintained its year-end target for the index at 4,200 points.

The reason for this decline in the stock market is the worsening economic conditions as a result of the Fed rate hike, the potential capital and liquidity problems caused by the banking crisis, the increasing dependence of consumers on credit to maintain spending.

The so-called “economic malaise” expected by Wells Fargo even before the Silicon Valley Bank crash last month will turn into an outright recession in the second half of the year. Meanwhile, the inversion of the yield curve and consumers’ growing reliance on credit are contributing to the bank’s bearish view of the market.

The economist noted that the U.S. stock market was virtually unscathed in the first quarter of 2023, even as investors were haunted by recession fears, warnings of falling earnings and an unprecedented banking crisis.

Wells Fargo noted that the S&P 500 is up about 7 percent since the beginning of the year because of falling Treasury bond yields and anticipated monetary policy easing by the Federal Reserve.

But the market’s recent rally has begun to slow as investors prepare for a dismal reporting season and concerns about the stability of the financial system remain.

Earlier we reported that artificial intelligence stocks in China fell sharply.