Stock Market Crash: S&P 500 is Primed For 15% Drop, Comerica CIO Says

  • 📰 BusinessInsider
  • ⏱ Reading Time:
  • 49 sec. here
  • 2 min. at publisher
  • 📊 Quality Score:
  • News: 23%
  • Publisher: 51%

Ireland News News

'The equity market is poised to struggle in the weeks and months ahead': Comerica Bank's CIO says the S&P 500 is primed for a 15% drop as weak earnings, high valuations, and a hawkish Fed all work against it

Year-to-date, the S&P 500 is up 8%. But in a note to clients on Friday, Lynch warned that the index is due to weaken in the near future with a recession on the horizon. He said it would return to levels near October 2022 lows of 3,491, which would represent 15% downside from current levels around 4,130.

Lynch sees several factors lining up to work against stocks. At the top of his list is the pullback in earnings he expects. "To be sure, inflation has come down from its 9.0% YOY peak last year, and the recent March CPI report showed a 5.0% YOY gain. Data since 1970 shows that in previous periods when inflation hovered at these levels, the S&P 500's P/E was just 15.5 times earnings, suggesting current equity prices may run into resistance until either earnings climb or stocks drop," Lynch said.When looking at stock valuations relative to bond yields, they also remain at historically high levels.

"The ERP is calculated by taking the earnings yield, which represents the inverse of the S&P 500's P/E ratio and subtracting the yield on the benchmark 10-year U.S. Treasury note," Lynch said."For example, at the current S&P 500 P/E of 19, the earnings yield for stocks is 1 divided by 19, or ~5.2%.

 

Thank you for your comment. Your comment will be published after being reviewed.
Please try again later.
We have summarized this news so that you can read it quickly. If you are interested in the news, you can read the full text here. Read more:

 /  🏆 729. in İE

Ireland Ireland Latest News, Ireland Ireland Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Comerica’s stock slumps as earnings show $3.7 billion of deposit flight since March 9An earlier version of this article compared a revenue move to the first-quarter of 2022 and not the fourth quarter. It has been corrected. Comerica Inc.’s...
Source: MarketWatch - 🏆 3. / 97 Read more »