There will be no ‘V-shaped bottom’ in this market

On Friday, the S&P 500 snapped a 7-week losing streak, the index’s longest since 2001.

Concerns about a slowing economy and tighter monetary policy from the Federal Reserve have been at the core of this decline. Last week’s rally is likely to have some investors wondering if the worst is over for stocks and wondering if we’re poised to see a comeback similar to the one that followed the pandemic-induced bear market of 2020.

However, a strategist does not see the ingredients for this type of recovery in the current environment.

“There is no V-shaped bottom here,” Michael Antonelli, managing director and market strategist at Baird, told Yahoo Finance Live on Friday.

“V-shaped funds are completely made up of the Fed getting really super friendly, putting a tailwind [behind the market], [or] some kind of fiscal boost,” Antonelli said. “Neither one is happening.”

Last week, the minutes of the Fed’s latest monetary policy meeting suggested that after raising its benchmark interest rate by 0.50% in early May, the central bank will do the same in both June and July. .

And if history is any guide, expect the current near-bear market to last about a year, Antonelli says.

“If you’re looking from peak to trough, the average bear market is about 338 days, so that’s a little less than a year,” Antonelli told Yahoo Finance. “If you talk from peak to valley, [and] back to the peak, that’s about 600 days, that’s a little over a year and a half. It’s going to take some time for us to get over this.”

Year-to-date, the S&P 500 (^GSPC) is down almost 13%, the Nasdaq (^IXIC) is down more than 22%, and the Dow (^DJI) is down more than 8%.

However, in the long term, history suggests that US equities tend to remain resilient and recover after sharp declines. After the worst 11 years in history, Antonelli points out, the rate was higher five years later.

Ines is a market reporter who covers stocks. Follow her on Twitter at @ines_ferre

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