The Dow Jones Industrial Average dropped 2.1%, and the S&P 500 index slid 2% on Tuesday as fear of higher rates continued to pressure market sentiment. Also, the latest batch of retail earnings raised concerns about the state of consumer spending.
Morgan Stanley’s chief US equity strategist Mike Wilson said that stocks could crash by 26% over the coming months after surging unsustainable highs. He sees similarities between current valuations and the “death zone” in Mt. Everest, representing the excessive levels that stock prices have climbed to since 2023 started.
Moreover, Jan Hatzius, Goldman Sachs’ head of global investment research and chief economist, said that he expects the Fed to raise rates by 25 basis points at its next three meetings.
On the other hand, markets have grown increasingly confident that the slowdown in inflation would drive the Federal Reserve to end the cycle of aggressive interest-rate hikes soon. However, the high rates could push the economy into a recession.
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