Piper Sandler said rising interest rates pose the biggest threat to the current bull market. In a note Thursday, the investment firm looked at 27 or more of the S&P 500’s main catalysts over the past 60 years. Chief investment strategist Michael Kantrowitz identified three main risks: rising interest rates, worsening unemployment and unforeseen global shocks. The following figure depicts the S&P 500 market correction to 10% or more since 1964. The three columns are titled “Higher Rates”, “Work Loss” and “Global Shock”, indicating the risk factors that pose each callback. Historically, interest rate-driven market pullbacks were the most common type of correction, although Cantrovitz noted that their frequency was reduced in the zero-rate world of the global financial crisis. But as inflation hovers at higher levels after the 199 pandemic, it is again a major threat to stocks, suggesting that the potential 10% correction may be outside. Kantrowitz said catalysts that could raise interest rates this year include inflation and job surprises, and President Donald Trump’s tariff policy could further increase volatility. “Our expectation is that interest rates will be volatile in the 4%-5% range this year and are in the 4%-5% range. More than 4.5% when rates are lower , potential equity is low, and the market can tolerate the increase in interest rates, but given that we are already at uncomfortable levels, there is no room for any swing. “On the other hand, the strategist stressed, “the sharpest, longest equity decline is ” is usually accompanied by employment-driven correction. While rate-driven callbacks are by far the most common, they also result in a smaller drop in a smaller amount of time. The third withdrawal caused by global problems is averaged about 15%, with the shortest duration.
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