Panuwat Dangsungnoen
Wells Fargo issued a near-term bearish call on the U.S. stock market Tuesday, arguing that Wall Street should anticipate a market correction over the next 3-6 months. The firm said the S&P 500 (SP500) could fall as far as 10% during that period, which would send the index to a level near 3,700.
“We are maintaining our 2023 SPX price target of 4200, but believe the risk/reward over the next six months is skewed to the downside,” the firm stated in a note to clients. “Over the next 3-6 months, we expect to see a 10% correction, with the SPX trading down to 3700.”
The reasoning behind the call falls into three separate buckets. First, Wells Fargo notes the aggressive monetary policy by the Federal Reserve. Second, the bank outlines the potential capital and liquidity problems brought on by the bank crisis. Finally, the firm notes its concerns around a consumer that has become increasingly more dependent upon credit to sustain spending.
At the moment, the S&P 500 is hovering near 4,110. A drop to 3,700 would indicate that the broad market index will decline to its November 2022 low point, also dragging down its benchmark tracking ETFs SPDR S&P 500 ETF Trust (NYSEARCA:SPY), iShares Core S&P 500 ETF (NYSEARCA:IVV) and Vanguard S&P 500 ETF (NYSEARCA:VOO). See an outlined chart below:
In broader financial news, U.S. markets on Tuesday remain quiet as they await the release of key inflation data this week, which in turn will signal the Federal Reserve’s future monetary policy.
Image and article originally from seekingalpha.com. Read the original article here.