Why the S&P 500 could also be in for a 1966-style bear market, in accordance with DWS Group

The S&P 500 has discovered good help just lately and, whereas in a bear market, the large-cap index might not fall a lot additional this 12 months, mentioned David Bianco, chief funding officer of the Americas for fund supervisor DWS Group. 

“I believe essentially the most comparable bear market we’ve skilled proper now’s 1966,” Bianco mentioned at a media occasion Tuesday. Whereas the Fed additionally was preventing inflation again within the ’60s, the S&P

solely fell 22% within the 1966 bear market, he mentioned, calling the interval “simply barely worse” than the 20.3% drop within the benchmark since its Jan. 3 closing peak at 4,796.56, in accordance with Dow Jones Market Knowledge.

Bianco famous that like in 1966, the U.S. has but to formally fall right into a recession in 2022. “I don’t anticipate the S&P to fall a lot farther from right here,” he mentioned.

The S&P 500 closed 2% decrease on Tuesday at 3,821.55, partially as traders develop more and more involved over a possible recession sparked by intense inflation and tighter financial coverage.

Learn Extra: How long will stocks stay in a bear market? It likely hinges on if a recession hits, says Wells Fargo Institute

Bianco additionally expects the S&P 500 to remain in a buying and selling vary of three,700 to 4,100 till late this 12 months. That’s down from the group’s earlier year-end 2022 target of 5,000.

“We don’t assume it’s inside attain for this 12 months, and it might be a tough attain even for the top of 2023,” mentioned Bianco.

 On Tuesday, a survey of U.S. consumer confidence dropped in June to a 16-month low of 98.7, as Individuals grew extra frightened about excessive fuel and meals costs and the potential for one other recession.

“Even when a small recession happens late this 12 months or early subsequent 12 months, which is changing into the consensus view,” in accordance with Bianco, he doesn’t anticipate “a nasty credit score” cycle to unfold. “I don’t assume anyone desires to default on their mortgages proper now. Their properties are nonetheless in-the-money relative to their debt ranges, because of smart reforms on lending,” he mentioned. “We see each incentive for them to need to keep good on the loans they’ve taken, and maintain the phrases in place that they’ve.” 

Except for the S&P 500’s sharp drop, the Dow Jones Industrial Common

fell 1.6% Tuesday and the Nasdaq Composite Index

shed 3%, marking the worst each day proportion decline for all three indexes in nearly two weeks, in accordance with Dow Jones Market Knowledge.

Learn extra: Presidential election cycle shows that stock market may bottom in the third quarter before rally in the fourth, analyst says

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