- The bank’s chief strategist, Michael Hartnett, has done an analysis of the last 19 bear markets and his forecast is not favorable.
- The S&P 500 returned almost 27% to investors last year, while so far in 2022 it is down 15%.
- “In the last 19 bear markets, the average drop has been 37% with an average duration of 289 days. If history repeats itself, today’s bear market will end in October 2022,” BofA said.
- Hartnett believes the S&P 500 will drop as low as 3,000 points, meaning if confirmed, the index would drop an additional 25% from current levels.
- “The good news is that bear markets are faster than bull markets,” he mentioned.
After enjoying strong returns in 2021 the stock market, investors are worried about the first few months of 2022.
In just over 5 months, the S&P 500 has accumulated a drop of 15%, while last year it ended in the green with a gain of almost 27%. And, according to several experts, the losses could continue.
It is not an easy time to invest. The market is facing rising interest rates, high and persistent inflation, major geopolitical tensions, and supply chain issues continue to list.
Against this backdrop, investors are wondering: How much further will stock fall? Since the market is volatile, with daily losses that exceed 2% and increases of just 1%.
Bank of America Chief Investment Strategist Michael Hartnett has done an analysis based on historical data and, based on past bear market trends, said there could be more months of crashes ahead.
“In the last 19 bear markets, the average drop has been 37% with an average duration of 289 days. If history repeats itself, today’s bear market will end in October 2022 with the S&P at 3000.”
BofA.
This means that, if the forecast comes true, the S&P 500 would add another drop of approximately 25% from current levels.
Additionally, Hartnett noted that over the past 25 years, the NYSE Composite has always fallen below its 100-week moving average during bear markets, but this year the index is trading just below that level, which could mean More disadvantages lie ahead.
The Nasdaq, for its part, has even worse performance than the S&P 500, with a drop so far in 2022 of 24.4%, while some technology stocks already accumulated losses of more than 60%.
Hartnett opines that Wall Street will spend much of the year dealing with an “inflation shock,” a “rate shock,” and a “recession shock” that will lead to negative returns and increased volatility.
While the strategist commented that “the good news is that bear markets are faster than bull markets”, he also stressed that investors who have taken refuge in commodities will need to sell, as there is also a risk of a recession.
Among other opinions within the market, the CEO of JP Morgan, Jamie Dimon, believes that there is only a 33% chance that the Federal Reserve will guarantee a “soft landing” for the country’s economy, although he projects that the Fed will avoid a recession. Deutsche Bank, on the other hand, estimates that a major recession will arrive in 2023.
