Bank of America analysts said on Monday that the S&P 500 could tumble another 20% from current levels in coming months if the U.S. enters a recession.
Former Federal Reserve Board of Governors member Randall Kroszner discusses if the Fed's inflation strategy is working on 'Cavuto: Coast to Coast.'could face another tumultuous year in 2023, with the S&P 500 experiencing a dramatic correction if the U.S. tumbles into a recession, according to Bank of America strategists.
In a Monday analyst note, the strategists warned the benchmark index could fall as low as 3,240 points, or about 20%, from current levels if the U.S. enters a recession in coming months. experiences a recession, the SPX bottoms out during the recession and not before," the note said. "Only the March 1945-October 1945 recession saw the SPX rally ahead of and throughout the recession.
The S&P has already plummeted about 16% this year as investors weigh concerns about stubbornly high inflation, steeper interest rate hikes and the likelihood of an economic downturn next year. But the Bank of America strategists warned on Monday there could be further declines ahead for the market. "Average and median SPX declines associated with recessions are 32.5% and 27.1%, respectively, and lasted 13.1 and 14.9 months, respectively," they wrote.
Despite a slight deceleration in consumer prices last month – inflation rose 7.7% annually, the slowest pace since January – there is still a growing consensus on Wall Street that the Fed will trigger a recession as it raises interest rates at the fastest pace in decades. The Federal Reserve in November approved a fourth consecutive 75-basis-point rate hike, lifting the federal funds rate to a range of 3.75% to 4% – well into restrictive levels – and showed no signs of pausing rate increases.
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