FX168 Financial News (North America) News On Thursday (6/20), Barry Bannister (Barry Bannister), chief stock strategist at Stifel (Stifel), said that the stock market appears to be about to enter a correction, and the unstable economic and monetary policy environment may cause the stock price to drop 10%.
Bannister has issued pessimistic warnings about the stock market many times this year. Since the stock market has been rising for so long, he reiterated his pessimistic view of the stock market. In an interview with Yahoo Finance, he warned that high valuations are about to collide with a weak economic situation, which could cause losses to investors as early as this summer.
“We are concerned that future returns will be reduced due to today's high levels. There's no better way to get lower long-term returns than paying too much today,” he warned.
Bannister estimates that the S&P 500 seems to be overvalued by about 10%, and he cites a calculation method that uses risk premiums for market stocks. Other valuation indicators, such as the ratio of household stock holdings to total assets, are also at historically high levels, he said.
At the same time, he predicted that the economy would experience higher-than-expected inflation and lower-than-expected growth in the second half of this year. Economic growth has been slowing, with the latest revised data showing GDP growth of 1.4% in the first quarter. Meanwhile, the inflation rate has remained high for two years. The inflation rate reached 3.3% in May, which is still far above the Federal Reserve's long-term price target of 2%.
Slowing economic growth and high prices are a dangerous combination. Some forecasters warn that the current economic situation is similar to the stagflation crisis in the 70s, when inflation was extremely high, economic growth was slow, and the stock market did not perform well.
The high inflation rate also affected the prospects for the Federal Reserve to cut interest rates, which is bad news for the stock market. Although the market expects the Fed to cut interest rates twice, the risk that the Fed will not be able to cut interest rates this year is even greater.
“As a result, the market may fall back, which is our prediction... I wouldn't be disappointed even if the market falls 10% to around 4,900 points,” Bannister warned. “If you plan to be more optimistic, maybe consider doing so in the fourth quarter, but I'll be cautious and buy some protective put options during the summer and early fall.”
Other investment veterans have warned that the stock market will fall if the valuation is too high. In extreme cases, long-term bearish forecasters such as John Hussman (John Hussman) have warned of a severe stock market crash, and if the valuation is correct, the stock market will fall 70%.