Bank of America Corp.’s strategist Michael Hartnett sees the recent downturn in U.S. stocks as a typical market correction rather than the onset of a sustained bear market, suggesting it could spur policy changes.
Favoring global shares over their U.S. counterparts for most of this year, Hartnett advises investors to consider buying the S&P 500 when it hits 5,300 points—approximately 4% lower than current values. This moment would coincide with an uptick in stock outflows, a rise in cash reserves among fund managers beyond 4%, and high-yield credit spreads nearing 400 basis points.
“This is a correction, not a bear market in U.S. equities,” he noted, emphasizing that a bear market could lead to recession and trigger shifts in trade and monetary strategies. The S&P 500 index has retreated 10% since peaking in February, as concerns mount that President Donald Trump’s measures might steer the economy toward a downturn amidst escalating trade conflicts. The tech-centric Nasdaq 100 likewise saw a 13% decline, driven by apprehensions over high valuations.
As inflationary pressures seem to subside, market participants are keenly awaiting the Federal Reserve’s upcoming policy decision. However, as it stands, futures markets do not anticipate another interest rate cut until at least June.
Earlier this week, Goldman Sachs revised its expectations for the S&P 500 following a steep market downturn, with the index dropping 9% from its peak in recent weeks, signaling a potential correction. The downturn was notably driven by the decline in “Magnificent 7” stocks, which saw share prices fall by 14%, adjusting their P/E ratios from 30x to 26x.
Facing the impact of increased policy uncertainty and economic growth concerns, Goldman Sachs has adjusted its S&P 500 projections. This adjustment was prompted by the mixed performance of major stocks and broader market dynamics, as economic anxieties and strategic repositioning drive volatility in the markets. As such, Goldman’s revised EPS forecasts now stand at $262 for 2025 and $280 for 2026.
