BlackRock, the world’s largest asset manager, is not jumping into the stock market sinking to buy the dip, as the S&P 500 trades in bearish territory on Monday and worries about soaring inflation and slowdown in US growth intensify.
“We’re not buying the decline in stocks because valuations haven’t really improved,” BlackRock strategists said in a note on Monday. “There is a risk of over-tightening by the Fed and pressures on profit margins are increasing.”
Stock market volatility rises as growth fears the Federal Reserve may become more hawkish at its two-day policy meeting which begins on Tuesday, as the central bank aims to rein in soaring inflation with monetary tightening . Some investors fear higher-than-expected inflation in May could prompt the Fed to become more aggressive in an already slowing U.S. economy, potentially triggering a recession.
See: Economists say Fed to hold 50 basis points this week, Powell to open door for more aggressive action later
Wall Street’s “fear gauge”, the Cboe Volatility Index, VIX,
jumped to 34 on Monday, from just under 28 on Friday, according to FactSet data, when last checked. This is above the VIX’s 200-day moving average of around 23 and above its 50-day moving average of nearly 27.
The S&P 500 SPX,
opened in bearish territory on Monday and stayed there late morning as it traded around 3,783, according to FactSet data, when last checked. The S&P 500 would enter a bear market with a close below 3,837.25, marking a 20% decline from its all-time high in early January.
Lily: Falling Stocks Put the S&P 500 on Track to Enter a Bear Market: What Investors Need to Know
S&P 500, fear gauge
The U.S. stock market fell last week, with all three major benchmarks posting their biggest losses since January. As stocks tumbled on Friday, Keith Lerner, co-chief investment officer of Truist Advisory Services, told MarketWatch he fears the S&P 500 could see an acceleration in selling if the index crosses its May 20 low. at 3,810.
The S&P 500 fell to 3,750.76 on Monday morning, setting a new 52-week low for intraday trading, according to FactSet data, when last checked. The index was down 2.9% late in the morning, while the Dow Jones Industrial Average DJIA,
fell 2% and the technology-heavy Nasdaq Composite COMP,
slipped 3.7%, according to FactSet data.
The CBOE NASDAQ Volatility Index, or VXN, jumped to around 40 late Monday morning from around 34 on Friday.
“We want to see VXN hit at least 37 if not 49 before we believe US tech stocks are really washed out enough to play for a rebound,” DataTrek Research co-founder Nicholas Colas said in an emailed note. email Monday.
Meanwhile, analysts expect companies in the S&P 500 index to increase earnings by 10.5% this year, according to the BlackRock report, which cites data from Refinitiv.
“That’s way too optimistic, in our view,” BlackRock strategists said. “Stocks could fall further if margin pressures increase.”
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Post expires at 4:22pm on Friday June 24th, 2022