Key insights
- The author believes the S&P 500's YTD decline could worsen, potentially reaching crash territory. Factors include persistent inflation limiting Fed rate cuts, supply chain disruptions from geopolitical events, weak consumer sentiment, and AI-related capital expenditure adjustments impacting tech earnings. The author anticipates continued market weakness through April and May, driven by these factors and downward revisions to YTD outlooks.
We’re closing on a 5% drop ytd within the S&P. 10% is traditionally considered a crash.
Supply shocks haven’t truly hit yet from the war, inflation is up so fed rates likely won’t be lowered for some time. Labor market is weakened and consumer sentiment is low. Not to mention AI capex was coming to head for Q1 earnings leading to harsher drops amongst some tech companies.
Reading the writing on the wall it seems that signals are pointing to this getting worse before it gets any better, but how long do you think until the market truly prices in impacts, I personally believe some is priced in but a good chunk really hasn’t been accounted for yet. What are your thoughts, what other risks or silver linings do you see?
At least for April it seems like it will be another ROUGH month from supply shocks. When Powell’s successor inevitably concurs we can’t lower fed rates due to the inflation this fiasco has caused I think May will be ANOTHER rough month. Without any major positive bumps I don’t see how ytd outlooks won’t continue to decrease.