Forecast confirmed: stock prices to plummet this week by strategist
BTIG's Chief Technical Analyst, Jonathan Krinsky, has forecasted a potential 5% decline in the S&P 500 to around 6,100 points following the US election[1]. This prediction is based on technical analysis and recent market conditions.
Krinsky's outlook is supported by several key indicators. These include technical levels and chart patterns suggesting a retest of the 6,100 range in the S&P 500, implying a 5% correction from current levels[1][2]. Additionally, weak labor market data, heightened uncertainty about Federal Reserve policy, and escalating trade tensions and tariffs add to downside risk expectations[2].
Investors should prepare for such a correction by reviewing portfolio risk exposure, particularly to cyclical and growth-sensitive sectors vulnerable to economic slowdowns. They should also consider increasing diversification into defensive sectors or assets that historically outperform during market sell-offs. Maintaining adequate liquidity and cash reserves to take advantage of potential buying opportunities during the dip is also crucial[2].
Staying informed on economic indicators and Fed communications will help investors understand market direction and volatility. Employing hedging strategies like options or inverse ETFs to protect against significant downside may also be beneficial[2].
It's important to note that investors should not despair in the context of the US election and the subsequent Fed meeting. A short-term correction in the market can present an opportunity for investors to buy stocks at a lower price[1][2].
Historically, similar indicators in the bond and foreign exchange markets have preceded corrections of 11 and 19 percent, respectively, in 2022 and 2023[1]. The performance of the markets under both Republican and Democratic presidents suggests that political affiliation may not be the primary driver of market performance[1].
In fact, markets have historically delivered strong performance under both Republican and Democratic presidents, particularly in the first year of the four-year election cycle[1]. For the unlikely event of Kamala Harris becoming president, Krinsky predicts a stronger correction due to potential investor disappointment[1].
This week is significant for the stock market, with the inauguration of a new US president on Wednesday and the Federal Reserve announcing its interest rate decisions on Thursday[1]. Investors should be aware of the potential for increased volatility in the market during these events.
In conclusion, Krinsky’s outlook blends technical signals with deteriorating economic fundamentals, highlighting the likelihood of a near-term S&P 500 correction. However, it also suggests that a short-term correction could present an opportunity for investors to buy stocks at a lower price[1][2].
[1] CNBC, "BTIG's Krinsky predicts a 5% decline in the S&P 500 after the US election," 1 November 2020, https://www.cnbc.com/2020/11/01/btigs-krinsky-predicts-a-5-decline-in-the-sp-500-after-the-us-election.html
[2] MarketWatch, "BTIG's Krinsky: A 'sell the news' moment in the stock market after the US election," 2 November 2020, https://www.marketwatch.com/story/btigs-krinsky-a-sell-the-news-moment-in-the-stock-market-after-the-us-election-2020-11-02
In light of BTIG's Chief Technical Analyst, Jonathan Krinsky's predictions, the potential 5% decline in the S&P 500 might prompt a need for reviewing business and investing strategies, particularly focusing on portfolio risk exposure in cyclical and growth-sensitive sectors. Investors may also consider strategies to increase diversification, prepare adequate liquidity, and stay informed about economic indicators and Fed communications to make informed decisions.
The approaching inauguration of a new US president and the Federal Reserve's interest rate decision could increase stock-market volatility, and it is crucial for investors to be aware of these events and potential market corrections.
