Investors shared equally The market has long been battered by extreme violence in April amid sharp volatility and losses not seen in decades.
The S&P 500 and Dow Jones industrial indexes posted the worst April since 1970, down 8.8% and 4.9%, respectively. The Nasdaq Composite’s 13.2% drop was the largest since April 2000, according to Dow Jones Market Data Tracker.
“It was a disaster,” James Bianco, president of Bianco Research LLC, told FOX Business. “Markets are starting to realize that the Fed is going to be very aggressive,” he added. Bianco expects policymakers to raise rates by 50 basis points at every meeting this year, including this week on Wednesday, with a larger increase likely at one of those two meetings later this year.
Standard & Poor’s 500
Investors may experience more negative volatility in May unless inflation begins to subside. “What ends this cycle is inflation and moderation in inflation, and that makes the Fed back off,” Bianco added.
The Consumer Price Index, which measures multiple items including food, gas, rents and health care, jumped 8.5% in March from the same period a year ago, the fastest pace since December 1981, when inflation hit 8.9%. The producer price index is even higher, rising by 11.2%. The diesel component rose 20.4%, driving the bulk of the increase. New updates due mid May.
Last week, the US economy unexpectedly contracted by 1.4% during the first quarter, which sparked fresh fears of a recession.
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In a recent research note, “Resetting Our Views,” Savita Subramanian of Bank of America describes equity and quantitative strategy what has changed so far this year. “The war, the GDP cuts, the Fed on steroids…”. As a result, it cut its year-end target for the S&P 500 to 4,500 which still means an annual advance of 8.9% from Friday’s closing price.
With the major averages dropping sharply this year, especially the Nasdaq, the chief market strategist at LPL Financial, Ryan Detrick, is taking a conflicting view.
“Everyone is bearish now, we get it, a couple of years ago everyone was bearish as well and look what happened. We’re not saying we’re going to probably get that kind of rally but there’s a lot of negativity and the economy is still going strong, earnings are driving things and earnings are still very strong. Here and we will work to support this opportunity,” he explained to FOX Business.
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