Markets will be crashed by a recession next year, with the benchmark US stock index potentially slumping 24% from its current level, Bank of America has said.
The bank argued that the US entered a downturn in the first quarter of the year when its economists expect growth to decline by 0.4%.
That would wreak havoc on stocks, as firms would be obliged to cut their earnings targets, they said in their 2023 outlook published recently.
“We think the market could drop as low as 3,000 based on a panoply of indicators, given a host of risks we face as payback continues and a recession unfolds,” Savita Subramanian, the bank’s head of US equity strategy, said.
Hitting that 3,000 level would amount for a 24% plunge from the S&P 500’s Tuesday close of 3,958.
“The bad news is, in 2023, the process of unwinding easy money could start to impact the economy,” she said.
And it’s not just a recession that will weigh down on markets next year, according to Bank of America. Hiking interest rates, persistent inflation, and war in Ukraine will also spook investors.
