Comerica’s Lynch expects S&P 500 to retest October lows

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S&P 500 up 8.0% year-to-date at writing is pretty much as far as it would go in 2023, says John Lynch. He’s the Chief Investment Officer at Comerica Wealth Management.

S&P 500 is not out of the woods just yet

More alarmingly, Lynch expects the benchmark index to actually trade down in the short term.

Several reasons from an earnings recession to weakening economic data, he said in a recent note sent to Invezz, could see it retest the October lows in the coming months.

We believe the combination of declining earnings, weakening economic growth, a steadfast Federal Reserve, and a lack of broad participation suggests equity market is poised to struggle in the months ahead.

Also on Friday, Dan Ashmore – our Head of Research argued in this article that the yield curve inversion is now at its deepest level since 1981 that has historically signalled a recession.

S&P 500 will recover in the second half of 2023

Making things worse is the central bank that looks adamant on keeping rates higher for longer even after the recent bank failures that are usually followed by tighter lending standards.

Nonetheless, Comerica’s Lynch agrees that the downside in equities market will likely be temporary and the S&P 500 will end this year in the range of 4,100 to 4,200 – roughly in line with where it is now.

Considering full employment and solid cash levels, we suspect the equity market, as a discounting mechanism will begin to price in a 2024 recovery in the second half of this year.

Consumer prices in March were up 5.0% versus last year, well above the Fed’s 2.0% target as Invezz reported HERE.

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