Dow plunges nearly 500 points, enters bear market territory
State Street Global Advisors chief investment strategist Michael Arone tells ‘The Claman Countdown’ to expect more market volatility as the Fed raises rates to fight inflation.
Stock investors needed a strong stomach after equity markets got another shellacking during the week as fears over a full-blown recession accelerate.
The Dow Jones Industrial Average on Friday briefly hit a bear market before bouncing back slightly from a 700-point drop. The average is now sitting at the lowest level since November 2020. This as the S&P 500 and Nasdaq Composite wrapped the second straight week of losses, retreating to June lows.
The pain may continue. Following the Federal Reserve’s 75-basis-point rate hike Wednesday and a new projected 4.4% Federal Funds rate — a percentage point higher than initial forecasts — the team at Goldman Sachs, led by David Kostin, cut their outlook for the S&P this year by 16% to 3,600 vs. a prior target of 4,300 as the economy faces the likelihood of sharp downturn or "hard landing."
"The forward paths of inflation, economic growth, interest rates, earnings, and valuations are all in flux more than usual with a wider distribution of potential outcomes. Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude, and duration of a potential recession and investment strategies for that outlook," Kostin explained in a research note distributed Friday.