With summer winding down, the U.S. stock market is set up for a potentially shaky fall.
“Recession fears are the most likely trigger of a retest of the June lows,” said Ed Clissold, chief U.S. strategist at Ned Davis Research, in an Aug. 31 note. “From a seasonality perspective, a retest could come in the next several weeks.”
When U.S. investors return from the long Labor-Day weekend, history indicates they’ll be facing the weakest time of the year for the S&P 500 index: the stretch from Sept. 6 to Oct. 25, according to the note.
NED DAVIS RESEARCH REPORT DATED AUG. 31, 2022
The stock market is already wobbly.
U.S. stocks closed sharply lower Friday, with all three major benchmarks suffering a third straight week of losses. Still, the S&P 500
ended 7% above its 52-week low of 3666.77 on June 16, according to Dow Jones Market Data.
“I think we have to go back and test that level,” said Bob Doll, chief investment officer of Crossmark Global Investments, in a phone interview. “I don’t think the bear market is necessarily over,” he said, though “what I don’t see is a massive decline from here.”
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Meanwhile, ongoing interest rate hikes by the Federal Reserve to combat soaring inflation in a slowing U.S. economy increase odds of a recession along with the prospects of this year’s stock-market lows being retested, according to the Ned Davis note. The Fed this year is “committed to removing liquidity from the financial system,” making a retest more likely, wrote Clissold.