Chris Harvey, head of equity strategy at Wells Fargo Securities, expects the S&P 500 to see a 10% correction in the next three to six months, due to worsening economic conditions.
In a note to clients in April, Harvey and his team of strategists wrote that the equity downside will be driven by:
- Aggressive monetary policy: The Federal Reserve is expected to continue raising interest rates in an effort to combat inflation. This could lead to a slowdown in economic growth, which would hurt corporate profits and stock prices.
- Potential capital/liquidity issues: The recent collapse of Silicon Valley Bank has raised concerns about the health of the financial system. If other banks start to falter, it could lead to a credit crunch, which would further damage the economy.
- A consumer that is increasingly reliant upon credit to sustain spending: Americans are carrying more debt than ever before. If they start to default on their loans, it could lead to a recession.
Harvey and his team maintained their year-end price target for the S&P 500 of 4,200. However, they warned that the market could see a significant correction in the near term.
It is important to note that this is just one analyst’s opinion. The market is always unpredictable, and it is impossible to say for sure what will happen in the future.
Disclaimer: America’s News Desk does not provide investment advice.