Bloomberg | Jan 10, 2020 00:34
(Bloomberg) -- The S&P 500 Index and 10-year U.S. Treasury yields will drop significantly in 2020 amid the chance of a recession later this year, according to Cantor Fitzgerald LP.
With effectiveness of monetary policy dwindling, imminent fiscal-policy action unlikely in the U.S. or Europe, low-quality U.S. job creation and the still-simmering trade dispute, a bearish view is still warranted, Cantor Global Chief Market Strategist Peter Cecchini wrote Wednesday in his 2020 outlook. He sees a recession in the second half of the year as “a possibility worthy of discussion.”
“Markets are out of rhythm with the fundamentals,” with participants almost universally betting on a turn in global growth which has failed to occur, Cecchini wrote. “We see no inflection in global growth, and many risk-assets are now priced to near-perfection.”
Cecchini has been one of Wall Street’s biggest bears for some time now, having set a target early last year of 2,390 for the S&P 500 in 2019. The benchmark rose 29% over the course of the year to end just below 3,231.
“Many of our non-consensus 2019 forecasts came to fruition, and we thought these conditions set the stage for a second-half risk-off in equities,” Cecchini wrote. “There was none. We did not expect significant U.S. equity multiple expansion. We were wrong.”
Cecchini remains of the view that a risk-asset correction is likely before U.S. equities are able to achieve an upturn in earnings growth.
While an S&P 500 rally to 3,300 is “a distinct possibility” given fear of missing out, the gauge at 3,200 and trading at current valuations is “simply ludicrous,” he said. He set his 2020 target at 2,880, by far the most bearish among a Bloomberg survey of Wall Street strategists. That would be about an 11% drop from Wednesday’s close.
The S&P 500 rose 0.4% to 3,267.36 at 10:08 a.m. in New York Thursday.
U.S. risk assets will likely come under pressure after the January effect runs its course, he wrote.
“While our second half view failed to manifest in 2019, we continue to believe that risk-assets are vulnerable to the many risks currently being ignored by market participants,” Cecchini concluded. “Risks of a 2020 U.S. recession are significantly elevated.”
Written By: Bloomberg
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
Get free real time quotes, charts and alerts on stocks, indices, currencies, commodities and bonds. Get free top of the line technical analysis/predictors.
More content, faster quotes and charts, and a smoother experience is available only on the App.