The S&P 500 could fall 20% by midyear as Powell's hawkish testimony sets the stage for higher rates than markets were expecting, JPMorgan says
That represents 20% downside from current levels, and comes as the S&P is nearing a major threshold at around 3,900, which JPMorgan called a level of"critical confluence" given that the 50-, 100-and 200-day averages are converging roughly around there.
"A break below 3888-3971 support would not only validate that assessment in our view, but we suspect it can trigger an acceleration to the downside," the note said. Analysts had previously pegged 3,500 as an area where the S&P 500 could find a bottom in the first half of this year. Tackling inflation, Fed officials have raised interest to a target rate of 4.50%-4.75%. But recent data have indicated inflation remains sticky while a strong labor market is supporting consumer demand, suggesting tighter policy in the future.on Tuesday, Powell noted the trend and said a more aggressive approach may be necessary.
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