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The US stock futures decline in early trading hours. Market sentiment turns negative along with consumer confidence. Here’s what analysts think is the extent to which S&P 500 can correct further.
US stock futures are indicating a week’s start to the market on Thursday, June 30. Ahead of the last day of the first half of 2022, the S&P 500 futures are down 1.15% in early morning trade. The S&P 500 looks on the track to record its worst first half in decades. This could be the index’s worst H1 since 1970.
Similar to the S&P 500, the Dow Jones futures are down 1.2% or 371 points while the Nasdaq 100 futures are down 1.88% or 221 points. during Wednesday’s trading session, the Dow Jones ended in the green. However, the S&P 500 and the Nasdaq Composite recorded the third consecutive day of negative returns.
Amid heavy correction in May and the first two weeks of June, the Dow Jones Industrial Average (INDEXDJX: .DJI) and S&P 500 (INDEXSP: .INX) are likely to record their worst three-month performance after Q1 2020. On the other hand, the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) has corrected more than 20% in the last two months registering its worst performance since 2008. John Lynch, chief investment officer for Comerica Wealth Management told CNBC:
“Surging inflation, the pivot in Fed policy, and historically pricey equity valuations were on the minds of investors as the year began. [T]he combination of COVID-19 lockdowns in China and Russia’s invasion of Ukraine has escalated volatility further with investors becoming increasingly concerned about the possibility of [a] global recession sometime within the next year.”
Increasing Calls for Global Recession by 2023
A number of market analysts are saying that the US has all chances of slipping into a recession by 2023. Economist Peter Schiff has warned that the US will slip into a recession that will be worse than the Great Recession of 2008.
Schiff’s comments came after the recent government report that shows a 1.6% decline in real GDP in the first quarter of 2022. In one of his Twitter posts on Wednesday, June 29, Schiff said:
The final read on Q1 GDP is now minus 1.6%. Since Q2 will likely be negative too, the #Fed and @JoeBiden will soon be forced to admit that Amercia’s red hot economy has actually been in a #recession all year, which will only get far worse with high #inflation and more rate hikes.
On the other hand, rampant inflation has been hitting US consumers hard. The Fed is thus determined to bring down inflation and is likely to announce multiple rate hikes ahead this year. This aggressive action from the Fed will likely boost the prospects of a recession.
If such a scenario pans out, expect heavy corrections to take place in US equities. George Ball, chairman of Sanders Morris Harris said:
“We do not believe the stock market has bottomed yet and we see further downside ahead. Investors should be holding elevated levels of cash right now. We see the S&P 500 bottoming at around 3,100, as the Federal Reserve’s aggressive, but necessary inflation-fighting measures are likely to depress corporate earnings and push stocks lower.”