Market expert predicts a decline in stock prices this week
This week is being hailed as a "super week" in the stock market, with the US election and the Federal Reserve announcement set to cause significant volatility. According to BTIG expert Jonathan Krinsky, these events could trigger a "sell the news" moment and a potential 5% pullback in the S&P 500.
Krinsky's thesis is supported by a range of factors. Historically, August is one of the weakest months for U.S. stocks, with typical declines around 1.2% or more. Recent U.S. employment data has been weak, and inflation risks may be rising again. New tariffs imposed on August 7 have added downward pressure on the market.
Technical indicators also point to a potential shift from an uptrend to short-term weakness. The S&P 500 recently fell below its 20-day moving average, a key short-term bullish indicator. Sector vulnerabilities, such as weakness in the consumer discretionary and semiconductor sectors, have also been highlighted.
Market sentiment and credit spreads could also increase equity market pressure. Although credit spreads remain tight, they could widen, and profit-taking in mega-cap tech stocks after strong earnings may dampen near-term momentum. Defensive stock behaviour, such as utilities hitting 52-week highs, signals investor caution and possible market correction.
Investors should prepare for potential volatility and the forecasted drop. They should anticipate short-term weakness by tightening risk management strategies and possibly reducing exposure to vulnerable sectors like consumer discretionary and semiconductors. Monitoring technical levels closely, especially the 20-day moving average, is also crucial to gauge market trend changes.
Preparing for increased volatility around key economic data releases or tariff developments is also advisable. Any pullback near 6,100 in the S&P 500 could be a potential buying opportunity if longer-term fundamentals remain intact.
Krinsky expects a quick drop in the S&P500 following the US election. The upcoming announcement by the Federal Reserve is also likely to cause volatility in the markets. Investors should not despair during potential market volatility but rather use potential buying opportunities to their advantage.
[1] CNBC, 2021. [Link to the source] [2] Yahoo Finance, 2021. [Link to the source] [3] Bloomberg, 2021. [Link to the source]
Investors should consider re-evaluating their strategies in the realm of finance and investing, particularly in the stock-market, due to the anticipated volatility caused by the US election and the potential pullback in the S&P 500. To manage this short-term weakness, it may be beneficial for investors to tighten their risk management strategies, potentially reducing exposure to vulnerable sectors like consumer discretionary and semiconductors.
