‘I don’t think the stock market is at a low’

The defeat in various asset markets at the hands of the Federal Reserve may not be over, former Wall Streeter and current Galaxy Digital CEO Mike Novogratz has warned.

“The bear case is that we have two to six months of this pain left,” Novogratz said on Yahoo Finance Live (video above). “The bull case is that the market is starting to break down. We are seeing a lot of breakouts, not necessarily in crypto, but in the rest of the world.”

Novogratz, who began his career at Goldman Sachs in 1989, did not rule out the S&P 500 falling below the 3,300 level later in the year. The benchmark is currently around 3,625.

“We are in a mess globally,” Novogratz explained. “Once trust is broken, it’s very hard to get it back. … It doesn’t look to me like the stock market is at a low.”

Novogratz’s caution appears to be well placed.

The Dow Jones Industrial Average (^DJI), S&P 500 (^GSPC), and Nasdaq Composite (^IXIC) remain mired in double-digit percentage declines for the year as the Federal Reserve aggressively raises interest rates to make push back inflation.

The tone of markets may not improve much later in the year either, as a stronger US dollar weighs on sentiment and companies use the upcoming earnings season to warn of future economic growth and stubbornly high costs.

In the third quarter, Wall Street analysts expect S&P 500 companies to see earnings-per-share growth of 3% year over year, sales growth of 13%, and margin contraction of 75 basis points to 11. 8%, according to data prepared by Goldman Sachs. Just a few months ago, analysts were anticipating 10% growth in earnings per share for S&P 500 companies in the third quarter.

Traders work on the floor of the New York Stock Exchange, Tuesday, Oct. 4, 2022. (AP Photo/Seth Wenig)

Goldman Sachs echoed Novogratz’s concerns in a new note this week, saying the bank will remain “tactically” underweight equities for the next three months amid a host of macroeconomic risks.

“A possible escalation of geopolitical risks, as well as a weak growth/inflation mix, keep downside risk for equities elevated: US CPI September [Consumer Price Index] Next Thursday’s print will be a big deal,” wrote Goldman Sachs strategist Cecilia Mariotti. Fed repricing. In our view, this is especially the case, as investors’ hopes for a Fed reversal have so far failed to come along with a material reset in initial rate volatility, which remains high both in absolute terms and relative to equities”.

brian sozzi is a general editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and in LinkedIn.

Click here for the latest stock market news and in-depth analysis, including events that move stocks.

Read the latest financial and business news from Yahoo Finance

Download the Yahoo Finance app to Apple either Android

Follow Yahoo Finance on Twitter, Facebook, Instagram, flip board, LinkedInY Youtube

Leave a Comment