Here is what 7 rate hikes from the Fed can do in the stock market

If the Federal Reserve raises interest rates seven times this year, as Bank of America’s head of global economics Ethan Harris predicted in a new call, the stock market will not be immune to these increases.

“I think it’s a flat market, to be honest,” Harris told Yahoo Finance Live on Monday. “I think now we have had the short-term corrections and the markets had to deal with the fact that the Fed will not be completely friendly going forward. They helped drive the stock market. Now they are taking that promise back I think the market will cope “I do not think it will be a great year.”

Goldman Sachs ‘Jan Hatzius raised his own expectations for interest rate hikes to five this year from four following Harris’ call a week ago, which included a cut in BofA’s 2022 GDP growth to 3.6% from 4%.

Markets have gone through an ugly start to the year as traders with disabilities call on strategists like Harris and Hatzius for much higher interest rates.

The Nasdaq Composite is heading for its worst launch on a January ever. With a 10% drop to Monday afternoon, Nasdaq’s January was able to surpass the 9.9% drop in January 2008, which had been the worst.

US Federal Reserve Chairman Jerome Powell speaks at an online news conference in a picture from the US Federal Reserve video broadcast from the Federal Reserve building in Washington, USA, January 26, 2022. US Federal Reserve Board / Distribution via REUTERS

US Federal Reserve Chairman Jerome Powell speaks at an online news conference in a picture from the US Federal Reserve video broadcast from the Federal Reserve building in Washington, USA, January 26, 2022. US Federal Reserve Board / Distribution via REUTERS

About 46% of Nasdaq’s members have fallen at least 50% from their 52-week highs, according to Charles Schwab’s investment strategist. Liz Ann Specials. Zoom out does not paint a better picture. About 76% of Nasdaq’s members have dropped at least 20% from their 52-week high.

Meanwhile, stocks traded at sky-high valuations have been hit as traders model in lower-than-expected future returns due to rising prices. AMD (AMD) shares have fallen 23% in January, Etsy (ETSY) has fallen 33% and Netflix (NFLX) has fallen by 36%.

It is quite certain that not everyone on the street risks what is a cheaper stock market today compared to a month ago.

Goldman Sachs strategist Peter Oppenheimer argues that this period of increased volatility is normal market behavior ahead of a shift in Fed policy.

“This is a correction in a bull market cycle. In our opinion, we remain in the early stages of the growth phase – returns are likely to be low, but the bull market should continue (as long as economies grow). In common with previous cycles, we believe that this phase will be less divided in terms of factor and sector leadership, “Oppenheimer said in a recent note.

Brian Sozzi is editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, Youtubeand save your

Leave a Comment