The S&P 500 index and VOO, its largest exchange-traded fund, fell for three straight days and hit their lowest level since last November.
Conclusion
- The S&P 500 index continued its downward trend.
- JPMorgan analysts expect the index to continue falling this month.
- If Donald Trump gives up on his war, the index could rise again later this year.
The blue-chip index, which tracks the largest U.S. companies, fell to $6,637, down more than 5.2% from this year’s high.
The retreat came as the crisis in the Middle East escalated, pushing crude oil prices to their highest point in years. Brent and West Texas Intermediate rose to more than $115 before giving back gains.
Rising crude oil prices pushed US Treasury yields up to 4.17% for the 10-year and 4.766% for the 30-year. The increase is a sign that market participants expect the Federal Reserve to maintain a dovish tone this year.
JPMorgan predicts a fall in the S&P 500 Index
Wall Street analysts are bullish about the market. In a research note, JPMorgan analysts predicted that the index would go into correction if the war continues.
A correction, defined as a 10% decline from its peak, would take it to $6,300, the lowest level since last August.
However, the analyst noted that signs of an abatement of the war in Iran would invalidate the bearish outlook. He noted:
“A firm exit from the conflict will end this tactical call as macro fundamentals support risk assets.”
Similarly, Yardeni, a prominent research firm, raised the probability of a market crash to 35% from the previous 20%.
However, as we wrote earlier, the S&P 500 and VOO stocks are likely to bounce back as President Donald Trump often focuses on the stock market and inflation. So it’s likely he’ll start giving up soon.
Going forward, the S&P 500 will react to the upcoming US inflation report due out on Wednesday.
Economists expect the report to show that the consumer price index rose by 2.5% in February. Higher inflation than that, combined with rising oil prices, could prompt Trump to give up on his war.
The index also reacts to Oracle’s upcoming earnings release on Tuesday. Oracle has become a major player in the field of artificial intelligence thanks to its huge backlog.
