we expect a sharp decline in the S & P 500 in 2019

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Since when is the Federal Reserve dovish bad for & nbsp;markets? "data-reactid =" 22 "> Since when is the Fed's dovish pretense bad for the markets?

The recent policy change, in which the Fed announced to the market that it did not expect any interest rate hikes in 2019, has resulted in a partial reversal of the yield curve, which began last Friday for the first time since 2007. The 3 The monthly bill now yields more than the 10-year US Treasury. An inverted yield curve historically precedes a recession.

"We believe that the recent reversal of some parts of the US Treasury yield curve is a bad sign for the S & P 500, which is expected to fall sharply during the rest of the year due to disappointment of the growth of the US economy, "wrote Capital Economics analysts. in a note to customers on Tuesday.

<p class = "canvas-atom-text-canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Analysts note that in the past, with the exception of In 1998, when the 10-year US Treasury underperformed other short-term bonds, the S & P 500 (^ GSPC) decreases within 18 months. analysts note that, except in 1998, when the 10-year US Treasury was reporting less than other short-term bonds, the S & P 500) declined within 18 months.

In addition to downside market risks, analysts do not see the Federal Reserve lowering interest rates as long as the economy has no reason to go wrong. "We doubt that rates will go down until 2020," they wrote.

In short, Capital Economics does not expect a recession, but slower growth in the United States and around the world.

Given that the S & P 500 companies derive nearly half of their revenues from abroad, this does not bode well for US equities.

"We expect the [S&P 500] will drop sharply to 2,300 by the end of 2019, "analysts wrote.

This would represent a drop of 18.4% over the current index, to just over 2,800. The 2,300 level is also close to its close of 2,351 on December 24, 2018, a day widely regarded as the last trough on the stock market.

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