As the week starts in which the U.S. Federal Reserve is expected to hike rates by a half a point, the S&P 500 index is down 13.3% year to date, the biggest four-month decline to start any year since 1939.Markets finished up the weakest month since March 2020 on Friday, with S&P 500 swooning 3.6%, after a 2.5% gain on Thursday, that came after a 2.8% plunge on Tuesday. Quite a week.
Tightening cycles by the Fed are often hard on equities. In the “soft landing” of the Fed’s 1994 hiking cycle, stocks managed to tread water for most of it, only gaining ground when it was almost over and long-term bond yields began to ease back, said Capital. “All this underpins our expectation that equities will continue to lose ground over the remainder of this year and into next year,” said the economists.
Bank of America says a drop below 4,000 is a “tipping point” that could trigger a mass exodus from stocks.