- According to Bank of America, a stock market correction of up to 12% could be imminent.
- The bank laid out a roadmap for the stock market, including a decline before the summer’s bullish rally.
- “We do not rule out the possibility of a pause in April-May as we prepare for a summer rally in June-August,” Bank of America said.
U.S. stocks, which have fallen sharply since the start of the year, are up about 10% and had the 14th best first-quarter profit margin on record, according to Bank of America.
However, given that 2024 is a presidential election year, stocks are likely to take a break from the summer bull run over the next two months, technical strategist Steven Suttmeyer said in a note Tuesday. Ta.
Suttmeyer highlighted that April and May are historically weak months for stocks in presidential election years, with the S&P 500 index on average flat in April and down 1.1% in May.
“Given this lackluster seasonality, we cannot exclude the possibility of a pause in April or May ahead of the summer rally in June or August,” Suttmeyer said.
According to YCharts data, the S&P 500 index has gone 59 days without a 2% decline, so a correction is likely overdue.
If a decline materializes in the stock market, Suttmayer emphasized that the support levels to watch for the S&P 500 index are 4,800 and 4,600, which represent the major breakout levels from December.
If the S&P 500 index were to fall to 4,600, it would be a 12% decline from current levels, which would be a garden-variety drop for investors.
“Area breakout points at 4,800 and 4,600 provide significant support for the remainder of 2024,” Suttmayer said.
However, even if the S&P 500 falls to the 4,600 level, it does not mean the bull market is over, Suttmayer said, with a long-term technical target of 6,150, which could be up 18% from where it is now. It is said that there is a sex. level.
“A breakout of the 4,800 area in January does not exclude the possibility of 6,150, which is consistent with the possibility of catch-up trade for a presidential cycle of a secular bull market through the end of 2024,” Suttmayer said. Stated.
Judging by the size of the stock market’s current rally, which began in October 2022, the bull market could be even bigger, the newspaper said.
Suttmeyer said the S&P 500 index is up 47% from its October 2022 low, which is more than half of the median stock market gain since its deep low of 106%, which lasted about four years. Stated. This suggests to Suttmeyer that the S&P 500 index could eventually trade up to 7,000 until late 2026, with room for a 34% rise.
So while the stock market is likely to correct in the short term, the broader bull market remains intact and should be viewed as a buying opportunity.
