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Why the S&P 500 could enter a 1966-style bear market, says DWS Group

Why the S&P 500 could enter a 1966-style bear market, says DWS Group

Why the S&P 500 could enter a 1966-style bear market, says DWS Group


David Bianco, chief investment officer for the Americas at fund manager DWS Group, said the S&P 500 has found good support recently, and while the large-cap index is in a bear market, it may not fall further this year.

“I think the last bear market we’re seeing right now was 1966,” Bianco said at a media event on Tuesday. While the Fed also struggled with inflation in the 1960s, the S&P SPX was down just 22% in the -0.07% bear market in 1966, he said, a period down from the benchmark’s 20.3% since its closing high, he said. “Slightly worse” was 4,796.56 on Jan. 3, according to Dow Jones Market Data.

Bianco noted that in 2022, as in 1966, the U.S. has not officially entered a recession. “I don’t expect the S&P to fall further from here,” he said.

The S&P 500 closed down 2 percent at 3,821.55 on Tuesday, in part as investors grew increasingly concerned about a potential recession sparked by high inflation and tighter monetary policy.

Bianco also expects the S&P 500 to remain in a trading range of 3,700 to 4,100 through the end of the year. That’s below the group’s previous target of 5,000 by the end of 2022.

“We think this year’s target is out of reach, and even the end of 2023 could be a tough one,” Bianco said.

The U.S. consumer confidence survey for June fell to a 16-month low of 98.7 on Tuesday, as Americans grew increasingly concerned about high oil and food prices and the possibility of another recession.

“Even if there’s a mini-recession at the end of this year or early next year, that’s becoming the consensus,” said Bianco, who doesn’t expect a “bad credit cycle”. “I don’t think anyone wants to default on their mortgage right now. Their home is still rich relative to their debt due to smart loan reform,” he said. “We see every incentive for them to keep their loans on good terms and keep the terms they have.”

In addition to a sharp drop in the S&P 500, the Dow Jones Industrial Average fell 1.6% to +0.27% on Tuesday and the Nasdaq Composite fell 3% to -0.03%, the biggest one-day percentage declines of all three indexes Nearly two weeks ago, according to Dow Jones Market Data.

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