"US S&P 500 Index May Fall Up to 20% by Year-End"

The S&P 500 index, centered on large-cap U.S. stocks, is forecasted to fall to around the 3600 level by the end of the year due to recession concerns.

Piper Sandler, known on Wall Street for its conservative market outlook, projected that the S&P 500 index could drop by 15-20% from its current level by year-end. Michael Kantrowitz, Piper Sandler's Chief Investment Strategist, stated in an investor note on the 20th (local time), "The gap between valuations and earnings, along with recession fears, will act as triggers for selling," and adjusted the year-end forecast for the S&P 500 index to the 3600-3800 range.

Some tech stocks such as Tesla and Netflix turned bearish following disappointing Q2 earnings this year. On the day, Tesla fell nearly 10% due to a slowdown in operating profit margin caused by price cuts and a forecasted reduction in deliveries for Q3, while Netflix dropped about 9% despite a surprise increase in Q2 subscriber numbers, as its revenue fell short of Wall Street estimates. Major semiconductor stocks including Nvidia (-3.31%), Intel (-3.16%), AMD (-5.31%), and Qualcomm (-2.98%) also declined collectively following weak earnings reported by Taiwan's TSMC.

Kantrowitz interpreted, "The significant declines in Tesla and Netflix shares on already known factors indicate increased profit-taking desires in the market." However, he explained that he does not expect a substantial drop within the next six months and narrowed the maximum downside forecast for the index to 20%.

[Image source=UPI Yonhap News]

Besides Piper Sandler, many investment institutions are also forecasting a bearish market for the second half of this year. Bloomberg reported, "Wall Street strategists expect the S&P 500 index to close below the 4100 level by year-end." Morgan Stanley, for instance, predicted the S&P 500 index could fall to 3900 by year-end. Morgan Stanley stated, "A decline in corporate earnings will put the brakes on the S&P 500 rally," and highlighted that liquidity conditions are likely to worsen due to high interest rates, exerting downward pressure on stock valuations over the next three months.

The stock market showed strength in the first half of this year, contrary to initial expectations. Despite the Federal Reserve's tightening stance, the economy was stronger than anticipated, and the rally in tech stocks fueled by the artificial intelligence (AI) boom served as the driving force behind the S&P 500's rise. Since the beginning of the year, the S&P 500 index has risen more than 18% (based on closing prices on the 20th). Nvidia surged over 220%, while Amazon (60%), Apple (50%), and other top eight large tech stocks including Alphabet and Microsoft mostly posted double-digit gains. These stocks account for 90.6% of the total market capitalization of the S&P 500.

This content was produced with the assistance of AI translation services.