The Nasdaq 100 (^NDX) lost 5.7% this week alone. The S&P 500 has lost 4.7% over the past five days, following a warmer-than-expected inflation print and gloomy warnings from package carrier FedEx (FDX).
Continuing our series, “What to do in a bear market,” Yahoo Finance asked the experts if the markets are headed lower from here.
Nasdaq Composite (^IXIC) hit particularly hard this week. What’s next for the technology heavy index?
The Nasdaq took off last week’s low of 11,900, notes Fiona Cincotta, senior financial markets analyst, at City Index.
“There are more cons to come,” she said Friday. So how many more?
“Sellers will look for support around 11,430 ahead of 11,036, the 2022 low. On the flip side, a rise above 12,650, the falling trend resistance, would open the door to 12,900, the weekly high ,” she continued.
How about the S&P 500 (^GSPC) ?
The broader market index closed below 3,900 on Thursday, prompting accelerated losses that afternoon and further declines on Friday.
“The S&P 500 continues to trend lower ahead of next week’s FOMC meeting, as investors worry that the recession threatens to feed hawks in a weakened economy,” said Sam Stovall, chief investment strategist at CFRA Research.
Is the S&P 500 going to hit its lows on June 16?
“The S&P 500 is about 6% higher than the year-to-date low reached in mid-June. History suggests, from a technical and market perspective, that previous lows may need to be tested and held to establish new support from which the market can advance,” said Bill Northey, director of investment senior at US Bank Wealth Management, Yahoo Finance.
Ann Berry, founder of Threadneedle Ventures, told Yahoo Finance Live that she thinks “the worst is yet to come.”
“I think the S&P could see another 10-15% correction down unfortunately. And I think that’s really exposed to downside risks depending on how energy prices continue to trend especially internationally,” she said.
Ross Mayfield, investment strategy analyst at Baird, admits that the likelihood of a dip below the June 16 level has increased.
“At this stage, I would still be surprised if the lows were reached in June, but the odds have certainly increased as inflation has been more stable than expected,” a he said.
How should investors position themselves if markets go lower?
“Quality and defensive companies tend to do better in these environments. A focus on cash flow generation, quality management, and earnings stability should be rewarded. Sectors like Utilities and Staples have become expensive but offer defensive attributes,” said Mayfield.
“We also like Healthcare as a late-cycle growth play,” he said.
Meanwhile Northey of US Bank Wealth Management said, “Currently, we recommend an underweight position in global equities relative to long-term goals and a corresponding overweight position in fixed income and global infrastructure.”
He added, “Within fixed income, the emphasis is on high-quality investment-grade taxable and municipal bonds as well as dedicated exposure to short-term US Treasury investments to manage overall risk exposure if interest rates continue to rise .”
Which sector can we expect to be affected by further drawdowns?
“During this decline, also unless June 16 holds low, the defensive sectors (consumer staples, healthcare and utilities) will continue to be relative outperformers, while communications, consumer discretionary and technology services will underperform, ” said CFRA Research Repository.
Ines is a markets reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre
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