The S&P 500 is heading for the worst first half of Richard Nixon’s presidency, according to Bloomberg.
With just seven trading days left until the end of June, the index has fallen 21% since the beginning of the year amid expectations that a toxic mix of high inflation and an aggressive US Federal Reserve (Fed) will lead the US economy to recession. The last time the S&P 500 fell that much during the first six months of any year was in 1970, according to data compiled by Bloomberg.
An inflation shock of the 1970s could send the index plunged about 33% from current levels to 2,525 amid stagnant inflation, according to Societe Generale SA analyst Manish Kabra. The key correlation with the 1970s is the risk that if investors start to believe that inflation will remain high for a longer period of time, markets will start to focus on the real one instead of the nominal earnings per share rate, which for this year is likely to be negative, SocGen reported.
It is recalled that the S&P 500 sank in a bear market at the beginning of last week before recovering strongly on Tuesday, however the recovery may not last long.
Source: Capital
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