The S&P 500 index has had a rough start to the year, and Cerity Partners’ Jim Lebenthal says the benchmark might be on its way to see a 10% correction.
Lebenthal’s outlook on SPX
According to Lebenthal, pending rate hikes and a less accommodative Fed means greater possibility of a bigger correction in the coming months. On CNBC’s “Halftime Report”, he said:
It’s been 15 months since you’ve seen a more than 5.0% decline in the S&P 500. Every dip during those 15 months was bought because of the cash that the Fed’s been injecting into the financial markets. Now that the central bank is pulling back, this could be it.
Lebenthal is focused on the 4,530 level – a break below which, he added, could clear way for a 10% correction. Earlier this month, Apex Financial’s Lee Baker said it was unlikely that SPX will continue to rally just as strongly in 2022 as it did last year.
The bull market is not over
Lebenthal, however, reiterated that a correction did not mean an end to the bull case; in fact, it was “healthy” for the stock market. He added:
I believe it’s healthy. It’s about time for investors to realise that valuations matter, and volatility does show up in the form of a correction at least once a year. But by no means is the bull market over. The economic expansion is still early. So, the bull market will stay intact.
The Nasdaq Composite is also down 8.0% for the year as investors continue to rotate out of technology on persistent inflation and talks of at least four rate hikes in 2022.
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