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Stock Markets May See Another Massive Leg Down Fairly Soon

Whereas analysts and investors expect stock prices to rebound, the opposite seems a more likely outcome. Further downside potential, as high as 10%, is in the cards, and actions by the Fed will not help matters much. There are also chaotic developments affecting supply chains and equity valuations keep dropping, further adding fuel to the fire. 

Stock Woes Aren’t Over Yet

Despite numerous government interventions, it is uncanny to see how the global economy continues to suffer. Over two years into the COVID-19 pandemic, supply chain issues continue to worsen, equity valuations keep dropping, a d stock markets receive a fresh battering. Moreover, the S7P 500 recently concluded its longest run of weekly losses in over 20 years, with little or no improvement in sight. 

BoA’s Head of US Equity and Quantitative Strategy Savita Subramanian, adds:

“I still think the worst is not behind us. There’s a pervasive fog of negative sentiment out there.”

That statement receives more credibility due to very bleak profit assessments from major US retailers. Numbers from Target Corp. and Cisco Systems Inc. offer a very bleak outlook, and investors did not respond kindly to these companies’ stock. Moreover, money managers flock to US government bonds as a last resort, confirming the current lockdowns in China and the Russia-Ukraine turmoil have sparked massive far among investors. 

Furthermore, there is still fear over a US recession, which would send the global economy into another downward spiral. While some experts downplay that outcome, one cannot say it is an impossible scenario either. Negative sentiment can lead a life of its own after a while and may not necessarily signal nearing the bottom end of the market. Keeping an eye on unemployment numbers will prove essential, as that rate can go up very quickly if nothing changes.