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Peter Chill of Academy Securities said there are three reasons why the stock market is likely to fall by at least 10%.
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Rising bond yields, persistent inflation and weakening U.S. consumers are making him “increasingly worried.”
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“I’m much more concerned about stocks falling more than 10% and the 10-year bond yield exceeding 4.5% than I am about stocks falling 5% to 10%.”
Some market experts are quite concerned about the sharp decline in stock prices. Peter Chill, a strategist at Academy Securities, said U.S. stocks are now likely to fall by at least 10%.
“I’m much more concerned about a 10%+ decline and 10-year Treasury yields topping 4.5% than I am about stocks falling 5-10%,” Chill said in a note Sunday. ” he said.
There are three reasons why he feels “tension increases.”
First, look, he says. (1) bond yield. Chill said the 10-year Treasury yield has risen to 4.33% and could rise further from there. In fact, the bond market could be facing a repeat of last fall’s historic crash.
“We were expecting to see further yield increases similar to what we saw last fall,” Chill wrote. “The 10-year bond yield rose every day last week, but is this a sign of things to come?”
The last time the 10-year Treasury yield reached this level was in February, and bond prices have risen since then. But things are changing, and the Fed is taking an increasingly hawkish view on rate cuts. Whispers of no rate cuts or even rate hikes are creeping around Wall Street after inflation turned out to be stronger than expected.
This brings us to Tchir’s second reason. (2) inflation. To him, it’s clear that inflation remains high. And questions may remain, as geopolitical risks, such as the seemingly endless war in Ukraine and possible Iranian involvement in the Middle East conflict, are likely to keep energy prices high and support inflation.
after that, (3) US consumers. So far, they have been acting like “zombies” and coming back to life multiple times, Chill said. But that is about to change, as the weight of rising debt and a cooling job market becomes too much to bear.
These risks necessitate “Defcon 2 level bearishness,” he said.
“I don’t think of stagflation as a risk, but I think we’re entering a period where we’re going to see yields rise on top of the Fed being handcuffed by a weak economy and sustained inflation,” he said. said. “It’s not a good combination.”
Read the original article on Business Insider
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