Investment Giant banks predict misery in the U.S. stock market will continue

According to Barclays, risks continue to point to a declining market. Goldman Sachs says the likelihood of a recession is growing.

Two giant banks predict the decline will continue in the US stock market, reports the news agency Reuters.

On Wednesday, stocks in the United States fell exceptionally sharply and the day became one of the darkest stock market days of the 2020s.

The world’s most watched stock index, the S&P 500, had fallen more than four percent on Wednesday after the stock market closed. Total of companies monitored by the S&P 500 index the market capitalization shrank by about $ 1,400 billion in one day.

British bank Barclays said in a report on Thursday that the risks associated with the index are pushing it further down. The bank’s strategists estimate that there are several factors weighing on the results of the US companies: the war started by Russia in Ukraine, China’s interest rate cuts and the tightening monetary policy of the US Federal Reserve.

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The bank’s strategists point out that the stimulus measures taken in the wake of the interest rate pandemic boosted consumption of goods by an exceptional amount, which propelled the companies’ results. Now consumption has begun to shift more to services.

According to Barclays, the short-term risks associated with the S&P 500 index have “tightly accumulated” to show a downward trend.

American Goldman Sachs bank strategists, on the other hand, estimate that the United States will drift into recession with a 35 percent probability over the next two years.

According to Goldman Sachs, in the 12 recessions since World War II, the median decline in U.S. stocks from the top to the bottom has been 24 percent. Compared to the peak levels in January, this is still 11 percent of current levels.

The S&P 500 index has fallen more than 17 percent this year. The technology-focused Nasdaq has already fallen nearly 27 percent and large companies Dow Jones nearly 14 percent.

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The downturn in the stock market at the beginning of the year is due to the accelerating inflation rate in the United States and the tightening of the monetary policy of the US Federal Reserve. Among other things, investors are nervous about whether the central bank will be able to raise interest rates without driving the U.S. economy into recession.

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