Investors should ‘gorge’ on stocks if the market falls another 18% as next bull market could send S&P 500 to 8,900 by 2028: Bank of America

A trader works on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., January 24, 2020.

The ongoing bear market in stocks is creating opportunities for long-term investors, according to Bank of America.
The bank suggests investors start to “nibble” on stocks when the S&P 500 hits 3,600, and “gorge” at 3,000.
Once the ongoing bear market ends, the S&P 500 could be primed for a bull market run to 8,900 by 2028, BofA said.

Long-term investors should get ready for big stock market opportunities as the S&P 500 continues to flesh out its bear market decline, according to Bank of America.

The bank highlighted the typical bear market playbook in a Friday note, observing that the stock market has entered its 20th bear market in the past 140 years. The average bear market has experienced a peak-to-trough decline of 37%, lasting 289 days.

“History is no guide to future performance but if it were, today’s bear market would end on October 19 with [the] S&P 500 at 3,000,” BofA said. A decline to 3,000 represents potential downside of about 18% from current levels, and would represent a total peak-to-trough decline of 38%, in-line with the typical bear market. 

At those levels, investors should “gorge” on stocks, as they would likely represent an attractive valuation as long as the economy doesn’t fall into a deep and prolonged recession. Meanwhile, if the S&P 500 falls to 3,300, investors should “bite” on stocks, and a decline to 3,600 means investors should start to “nibble.” 

The fundamental drivers behind such a bear market include an inflation shock (which is already playing itself out), an interest rate shock, and a recession shock and crash, according to the note.

The inflation shock materialized after May’s CPI report saw prices rise 8.6%, …read more

Source:: Businessinsider

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