The stock market is headed for a disappointing few months, according to two investing veterans who spoke with Business Insider. With stock prices already at sky-high levels, the likelihood of flat or negative returns by the end of the year is increasing.
David Morrison, a market analyst at Trade Nation, expressed skepticism about the recent rally in stocks, noting that the S&P 500 and Dow Jones Industrial Average are both near record highs following a cooler April inflation reading. He believes that the market is so expensive that it’s difficult to see it moving higher from its current levels. Morrison predicts multiple sharp corrections of at least 10%, with the benchmark index ending the year around 4,500.
Morrison’s view contrasts with the optimism of many investors who anticipate a rate cut from the Federal Reserve as a positive catalyst. However, he believes that the Fed may postpone any rate cuts for another three months, potentially leading to no cuts at all this year if inflation readings remain high.
Will McGough, the director of investments at Prime Capital Investment Advisors, also sees stocks ending the year flat to where they are currently trading. He points out that the Fed has no urgent need to lower interest rates, as rates have been higher in the past without causing a recession.
Both Morrison and McGough warn of obstacles that could prevent stocks from moving higher in the coming months. Morrison believes there is a decent chance of a recession in the next year, citing indicators such as the inverted 2-10 Treasury yield curve. McGough anticipates increased volatility in the second half of the year, particularly leading up to the presidential election in November.
Overall, the outlook for the stock market in the coming months appears uncertain, with the potential for a rocky road ahead. Investors may need to brace themselves for a period of stagnation or even decline in stock prices as various economic and political factors come into play.
