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The US stock market is experiencing one of its worst weeks this year as pessimism about the economy rises and losses are likely to accelerate in the coming months amid hot inflation and an aggressive Federal Reserve.

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That, according to Bank of America strategist Michael Hartnett, who warned in an analyst note this week that “the inflationary shock is not over yet” and that the ensuing earnings recession will hasten further market declines.

The S&P 500 has already fallen more than 6% this week due to concerns about exorbitant inflation, rising interest rates and a bleak economic outlook continue to put pressure on the market. Meanwhile, the Dow Jones Industrial Average is down more than 1,800 points and the Nasdaq Composite is down about 1.7%.

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Hartnett said past bear markets show an average peak-to-trough drop in the underlying S&P 500 of about 37% over 289 days. This implies current bear market – which began in early June – will end in October with a figure of about 3020 points. This would mean a decline of nearly 22% from current levels.

INFLATION INCREASED FASTER THAN EXPECTED IN AUGUST, SUPPORTING PAINFULLY HIGH PRICES

Ticker Safety Last Change Change %
me: dj AVERAGE DOW JONES 30822.42 -139.40 -0.45%
Me: COMP COMPOSITE INDEX NASDAQ 11448.403659 -103.95 -0.90%
SP500 S&P 500 3873.33 -28.02 -0.72%

“History does not point to the future, but history says the bear market will end on October 19, 2022 (35th anniversary of Black Monday) with the S&P 500 at 3020 (note the Nasdaq has already dropped 29%),” he wrote. .

The analyst note comes just days after the Labor Department said the consumer price index for August was hotter than expected. Prices rose 0.1% m/m and 8.3% y/y, analysts’ dashing hopes for a reduction in the monthly decline.

Stocks fell sharply on Tuesday after an unexpectedly heated fears report of an even more aggressive Federal Reservewhile the Dow Jones Industrial Average fell 1,276 points, its worst day since June 2020.

Federal Reserve Chairman Jerome Powell

Investors are already gearing up for next week’s Fed policy meeting, scheduled for September 20-21. Traders are betting that officials will approve another super-wide 75 basis point rate hike – the third this year – after the meeting ends, though some on Wall Street believe central banks could go even further if the score increases.

Hartnett said markets have already priced in a rate hike, whether the Fed goes for a 75 basis point or 100 basis point hike.