UBS Analyst: This Is When Investors Should Buy the Dip

Although midterm election results and encouraging inflation news have sent U.S. stocks to their highest since August, a prominent UBS analyst says the recession is looming and the global economy will continue to shrink, with markets falling another 16 percent before bottoming out. went out.

In a note to clients published last week, UBS Analyst Group, led by chief economist Arend Kaptin, said weak corporate earnings and continued Federal Reserve interest rate hikes will continue to hit stocks for the rest of the year and at least into early 2023. The Standard & Poor’s 500 index fell to 3,200 before the market fell. At that point, if the Fed’s Open Market Committee moves to cut rates, stocks will improve but not by much — by which time the U.S. economy will be in recession, the note said.

Even then, Kaptin writes, investors should remain patient. As for the S&P 500, “in We expect it will not regain the January 2022 high of 4,796 before the end of 2025,” Kaptin said.

If accurate, Kaptain’s analysis suggests investors should avoid turning the post-election rising market into a bear trap, but anyone looking to buy into the trap should wait a little longer. For help navigating this complex market, consider Match for free From A Financial advisor.

When to buy dip?

According to Captain Analytics, we are a few months away from the end of the market. Then, perhaps, investors can Buy the dip.

“Weak growth and earnings will push the market lower before prices decline to a low of 3,200 in Q2 ’23 and a high of 3,900 by the end of ’23,” Kaptin wrote.

The S&P 500 is down more than 19% since Nov. 1 and is down more than 23% early in the fourth quarter. A further decline to 3,200 is the index down 15% from November 9 to 3,748.57.

Once the Fed stops raising interest rates to fight inflation and starts cutting them in response to expected economic weakness, that’s the point at which stocks will bottom out. By then, however, Kaptain expects economic growth to be flat or in recession, a growth that will hurt corporate earnings and possibly prevent stocks from rallying.

Policymakers believe the Fed will end rate hikes at some point in the first half of 2023. At that point, the market may go lower.

The team behind the UBS note forecast growth of just 2.31% next year, the third slowest growth rate in the past 30 years.

“Our forecast is something akin to a ‘global recession,'” the note said. “For the US, we now expect zero growth in 2023 and 2024 and a recession in 2023.”

That would see the Fed cut rates from its current rate of 3.75%, a move analysts expect would push the S&P 500 to 3,900 by the end of next year.

“Coupled with rapidly falling inflation, the Fed will cut the federal funds rate to 1.25% as early as 2024,” the note said. “The momentum of that pivot will drive every asset class next year.”

The last one Official failure In the United States in the first half of 2020, a two-month period during the Covid-19 pandemic has sent stocks plummeting. The S&P 500 opened the year at 3,245, fell below 2,450 in March, then rebounded to 3,756.

at last

UBS Chief Economist Arendt Kaptain said in a published note to clients that weak corporate earnings and continued Federal Reserve interest rate hikes will hurt stocks until early 2023 before the market settles. At that time it may be possible to buy a dip.

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