As the S&P 500 skirts above Bear territory, after suffering more than $1 trillion in losses, a new survey of investors predicts there will be more pain to come.
1,009 participants in the latest MLIV Pulse survey believe the S&P is likely to continue its decline before reaching around 3,500 at bottom, according to the average of their responses. Participants in the MLIV survey became more pessimistic over the latter part of the period from May 17-20.
47% of respondents said they believed the S&P 500 would fall 30% from its peak before the Fed shifts to dovish policy, while a similar number felt US unemployment would rise to 6%.
Participants overwhelmingly felt equities would see further declines before the risk-aversion cycle ended, while housing, commodities and bonds were also cited as at risk.
31% of respondents said the largest boost to growth would come with the end of the Fed’s rate hikes, and 27% said they would prefer to seer China to end its COVID lockdowns. 20% said an end to the war in Ukraine would be best, and another 20% wanted to see a drop in crude oil to $70 a barrel.
That would be a drop of over 10% from Friday’s close of 3,901, at a full 27% drop from the January high.
Even though the market rose almost 2% on Monday, derivatives suggest that investors are worried that was just a temporary rise.
The Fed’s hawkish-at-all-costs posture, the chaos in supply chains and intensifying threats to the business cycle are all undermining confidence in Corporate America’s profit machine, while equity valuations have sunk.
After the recent run of losses, only 4% of the MLIV readers say they believe the S&P 500 has hit bottom for the year, and there is even a small group which think a historic collapse to 2,240 may occur, taking the market back to pandemic lows.
Savita Subramanian, head of US equity and quantitative strategy at Bank of America Corp., on Bloomberg Television Friday said, “I still think the worst is not behind us. There’s a pervasive fog of negative sentiment out there.”
Low profit assessments from Walmart and Target, as well as Cisco caused investor confidence to waver, as a renewed haven bid for US government bonds suggested money managers were growing concerned about the state of the economy, as well as continued lockdowns in China, and the prolonged Russia-Ukraine conflict. Option market traders continue to be cautious as the ratio of put to call contracts on individual equities on the Cboe rose to the highest level since March 2020.
