- Exit the stock market rally now as the S&P 500 index could fall around 22%, according to the chief market strategist at FS Investments.
- The benchmark is up about 8% so far in 2023 on hopes that the Federal Reserve will end interest rate hikes soon.
- “This is a golden opportunity to use this bear market rally to de-risk ahead of potentially very painful losses over the next six, nine, 12 months,” Troy Gayeski said.
The stock market is heading for a sharp setback that could see the S&P 500 plunge about 22% over the next few quarters, according to the chief market strategist at FS Investments.
That means investors shouldn’t wait any longer to cash in on this year’s rally in equities and should start selling their holdings now, Troy Gayeski said during a recent episode of the Podcast “What goes up” hosted by Bloomberg. “There’s no reason to wait. It’s not like you’re going to leave another 10% on the table,” he said.
“First of all, the strongest rallies have always been in bear markets,” Gayeski continued.
“Usually they’re driven by technical factors. And then there’s a narrative that’s set up to justify it: the most recent was that inflation is going to slow enough that the Fed doesn’t have to raise anymore, and then we’re going to have a recession and one way or another that’s going to lead to a quick cut in the Fed’s share But aren’t recessions bad for revenues or profits? sense,” he added.
So far this year, the S&P 500 has risen around 8%, largely on investors’ hopes that the Federal Reserve will ease its tight monetary policy – which aims to keep inflation in check – as it faces turbulence in the US banking sector.
But like Gayeski, market experts, including Jeremy Grantham and Morgan Stanley’s top stock picker, Mike Wilson, don’t expect the rally to last long. Wilson warned that the S&P 500 is set to fall more than 20% later this year due to a looming earnings slump and fallout from the bank shakeouts, by Bloomberg.
“We always thought that this bear market would be significantly worse than the 2018 correction or some of the shocks we had in the post-Great Financial Crisis period, but not as bad as we had since 2002 and also the crisis. financial,” says Gayeski.
“This is a golden opportunity to use this bear market rally to de-risk before potentially very painful losses over the next six, nine, 12 months,” he added.