2023-11-29 00:00:04
Research firm BCA Research predicted on Tuesday (27th) that the stock market will fall back, saying that this is inevitable in 2024 and may cause the stock market to fall by 27% from current levels.
BCA strategists said in their investment outlook report for next year: “Unless inflation rises significantly, we do not expect further U.S. interest rate increases in the next year. However, investors’ expectations for easing policy before the recession is too high, and the Expectations of easing policy following the recession is too low.”
Strategists predict that stocks might fall sharply due to the recession, with the S&P index hovering between 3,300 and 3,700 next year, pushing the index below its October 2022 lows.
The report mentioned that all the effects of the Federal Reserve’s continuous interest rate hikes over the past year may be felt in the next recession, and a series of factors such as depleting U.S. household savings, weak lending standards, loan demand and credit growth will leading to economic recession.
Strategists warn that neither a long-term zero interest rate policy nor the continued use of quantitative easing as a monetary policy tool is likely to occur in the next recession. The average interest rate over the next 10 years is likely to be much higher than the past 10 years.
So, how should investors respond? “With long-term government bond yields falling sharply, a recession scenario would mean a sharp decline in the U.S. stock-to-bond ratio, which would be a strong argument for underweighting equities in global multi-asset portfolios,” the BCA said.
They are bearish to underweight industrial metals and neutral on oil and energy. With a recession averted, they expect crude oil prices to top $110 a barrel next year.
Conversely, they are bullish on stocks that have been rising recentlygold, because of the “multiple supports” brought regarding by falling real bond yields.Russia-Ukraine war ceasefire would be a salegoldopportunities, although they currently maintain an overweight stance.
Notably, BCA’s bearish view seems particularly compelling as Wall Street bulls including Deutsche Bank, Bank of America and RBC expect the S&P to hit or exceed 5,000 by the end of next year .
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