(Bloomberg) – U.S. equity investors should brace for a correction in the coming months, Wells Fargo & Co. strategists have said, joining a chorus of warnings that Wall Street is about to experience a run more bumpy after the mighty rally last year.
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“Pullbacks are likely to be more frequent in this more turbulent stock market,” the strategists led by Christopher P. Harvey wrote in a note to clients, forecasting a 10% drop in the S&P 500 index by the summer. “Ultimately, the mindset of the market to fold but not break ultimately fails investors in 2022.”
The benchmark US equities index is trading near an all-time high, after posting a successful rally of 27% last year. As the Federal Reserve prepares to put the brakes on support measures and fears the economic recovery has peaked, strategists at Goldman Sachs Group Inc. at BlackRock’s Investment Institute expect returns. are more moderate this year, while JPMorgan Chase & Co. this week warned that the US market “could stall” if the outperformance of tech stocks begins to wane.
“A combination of slower growth, a hawkish Fed, spike in pricing and the belief that long-term US growth has not improved is leading to multiple cuts and frustrating bulls,” the strategists said. from Well Fargo in their forecast for 2022. âMargins peak as pricing power declines, the workforce becomes an even larger ‘seller’s market’ and consumer demand normalizes. “
The silver lining in their bleak outlook is that the crisis may prove to be short-lived. Well, Fargo sees a year-end rally for the S&P 500, following a “red wave” in the midterm election that they say will hand control of Congress over to Republicans.
âThere will likely be a correction in the US stock market in the first half of 2022, but I expect a relatively quick recovery,â said Kristina Hooper, chief global markets strategist at Invesco earlier this week. “It’s been so long since we last had a major correction that the chances of a correction have increased.”
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