Wall Street turns bearish

One bad year in the stock market has turned Wall Street strategists into bears after two decades of bullishness.

The average forecast of handicappers tracked by Bloomberg calls for a decline in the S&P 500 next year, the first time the aggregate prediction has been negative since at least 1999.

Most of them turned progressively dourer as the worst year in the market since the financial crisis moved toward its end. Strategists often say they have no crystal ball, and the breadth of outcomes seen by 17 firms makes the point. The S&P 500 is forecast to do everything, from rising by 10 percent by next December, to falling by 17 percent, the widest gap since 2009, reflecting a debate over the path of Federal Reserve policy and whether the economy is bound for a recession.

“There is a divide economically, and that is what is causing a divide among the market forecasters for the S&P 500,” said Rich Weiss, chief investment officer of multi-asset strategies at American Century Investments.

“For the stock market to be down two years in a row, that doesn’t happen very often. That would assume that this recession is really going to be bad and the market continues downward or flat for a longer time.”

In almost a century of historic data, two straight years of losses or more only occurred on four separate occasions, with the latest episode coming during the bursting of the dot-com bubble.

At 4 009, the average projection for the S&P 500 calls for a decline of more than 1 percent by the end of 2023 from Thursday’s close. With just one month to go, 2022 continues to be one of the most punishing years for investors.

Dip buyers kept getting lured back by violent bounces, only to see shares drop to fresh lows. Outside commodities, almost every major financial asset lost money. Even trades that once worked as a hedge during market crashes, such as buying put options on the S&P 500, fell flat.

Most investors and strategists did not see it coming, partly because the Fed originally judged inflation to be transitory, then had to hasten monetary tightening to battle runaway consumer prices. – Bloomberg.