It’s been a rough few days on Wall Street. Friday’s disappointing July jobs report stoked fears of a coming recession, worries that worsened over the weekend amid a sell-off in global markets, with stocks opening the week lower. The Japanese stock market has been confirmed to have entered a bear market, with the Nikkei plummeting 12.4%, its worst day since Black Monday in 1987. The month has just arrived. The S&P 500, down nearly 9%, may soon join the tech-heavy index. The Dow Jones Industrial Average is down more than 6% from its recent high. Coupled with falling U.S. Treasury yields and Wall Street’s fear index surging to its highest level since 2020, investors are growing increasingly uneasy about the market and economy. The prospect of an emergency interest rate cut by the Federal Reserve adds to these concerns. .VIX 1D mountain VIX On Wall Street, however, many investors expect worries about an economic slowdown to be overdone and the market to overreact. They believe the sell-off was long overdue given the extent of this year’s rally, and many expect a pullback could soon become a buying opportunity — especially in the lagging technology sector. “It looks like the panic selling was a little bit more severe than it should have been,” said Mark Malek, chief investment officer at Siebert. “At some point, you want cooler heads to come in and see this as a buying opportunity,” Malek added. — They haven’t had a chance in months, but they might now.” Continued strength in the disappointing July non-farm payrolls report may have stoked fears of an economic downturn, but many investors are wondering whether that will be the case. are becoming a reality, as they see continued strength in both the economy and company reports during the second-quarter earnings season. According to the Atlanta Federal Reserve Bank’s GDPNow forecast, as of August 1, the U.S. economy is expected to grow by 2.5% in the third quarter. Meanwhile, U.S. companies are expected to post their highest year-over-year earnings growth since the fourth quarter of 2021, FactSet senior earnings analyst John Butters said in a report on Friday. In the second quarter, the S&P 500’s composite earnings growth rate, which includes actual results as well as forecasts from companies that have not yet reported, is expected to rise 11.5% annually. Given those numbers, the share price decline over the past three sessions appears to have more to do with valuation than the economy or earnings prospects. Historically, the stock market has experienced an average correction of 10% per year, according to Bank of America. “We’re not seeing an earnings recession, we’re not seeing an economic recession,” said Sam Stovall, chief investment strategist at CFRA Research. “But we do think valuations need to return to historical averages.” Stovall noted that the S&P 500 The current forward price-to-earnings ratio is 20.9 times, down from 22 times earlier this year. However, this is still above the 20-year historical average of around 16.5. The strategist predicts that the S&P 500 could fall into a correction of between 10% and 15%. To be sure, investors who don’t expect a recession say they should continue to monitor consumers for any weakness. “What we really need to focus on, and this is the challenge right now, is if we start to see consumer confidence decline and consumption decline, then we have to really worry about a recession,” Siebert’s Malik said. For long-term investors, the sell-off could soon become an opportunity to buy back into a market that began to froth earlier this year. Jamie Meyers, senior analyst at Laffer Tengler Investments, said he is now considering adding Nvidia to the company’s growth strategy. The number of AI beneficiaries has doubled this year, but is more than 28% below recent highs. It fell 6% on Monday. “Nvidia is a name we’ve wanted to add for a long time, but it’s never been cheap enough based on our valuation metrics. Every time I say, ‘Let’s wait for a pullback,’ it just keeps going up,” Meyer said Si said. “So, I mean, I think now is the time to start thinking about adding (additions).” In fact, a market pullback could benefit the tech industry, CFRA’s Stovall said. The strategist predicts that Big Tech stocks could regain their lead if investors experience a correction after calls for a recession pass. All the so-called “Big Seven” names are down more than 10% from their recent highs. “If we were to conclude this decline based on the lack of fear of a recession, then I think we would essentially be back to where we were as investors would be attracted to those that are likely to show the greatest growth,” Stovall said. areas. “That would be your technology, communications services, and maybe industrial and consumer discretionary. At the same time, defensive stocks such as consumer staples and health care could go from “first to worst,” he said. For retail investors, the key is to keep a long-term view and remain diligent, and remember that the market has historically “The worst thing you can do is sell at the bottom and the price will go back up. I mean, I think the message is, hold on,” Meyers said. “If you do have some cash on the sidelines, it might be time to start buying some quality brands that you want to own long-term.”
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