The following three months could also be something however calm.
CFRA’s Sam Stovall warns the market is getting into one of many hardest durations of the yr.
“The third quarter is by far the weakest of the 4 quarters of the yr — gaining solely 0.5% on common,” the agency’s chief funding strategist informed AnotherBillionaire Information’s “Buying and selling Nation” on Monday.
Stovall builds his case based mostly on knowledge going again to 1945. In the course of the different quarters, he finds, the S&P 500 sees common returns of two% to virtually 4%.
His evaluation comes two days earlier than 2020’s second half begins and whereas coronavirus infections rise.
“The most important threat is the variety of instances of the Covid virus spiking as soon as once more, due to the cascading impact that it will have on company earnings and the uncertainty that it will current towards the election in November,” Stovall mentioned.
Regardless of 2020’s unprecedented downturn, Stovall says he believes the weaker historic pattern will apply this yr, too. He contends the market pullback that started on June eight hasn’t ended but.
“We have been stumbling alongside the way in which. We had a 7% pullback,” he mentioned. “Someday within the third quarter we find yourself concluding this correction with just a little deeper sell-off.”
His S&P 500 stage to observe is 2,850, which means one other 7% drop based mostly on Monday’s shut.
However earnings season might purchase buyers a while.
Based on Stovall, second-quarter earnings estimates are so low, they need to beat the Road and function a short-term bullish driver. So, July might emerge as a stronger month for the market with August and September seeing essentially the most bother.
But, his forecast is not all doom and gloom.
Stovall expects the market and economic system to efficiently recuperate from the virus fallout and seasonal woes.
“Twelve months from now I believe we will be in new excessive territory,” Stovall mentioned. “As soon as we do really see the economic system enhance, as soon as we do get justification of 2021 earnings projections for a 30%-plus advance in company earnings, then I believe the market will be capable of work its manner larger.”
In a yr, Stovall predicts, the S&P 500 will probably be at 3,435 — a 1% acquire from the all-time excessive hit in February.