US Stock Market Debate: "8% Drop" vs "Rebound Imminent"

Son Min

Summary

European investment banks warned of the possibility of further declines in the S&P500 index, citing negative signals in US economic indicators.
HSBC and UBS each downgraded US stocks to 'neutral' and predicted that the S&P500 index could fall by about 8%.
On the other hand, optimistic forecasts have emerged on Wall Street that the S&P500 index could rise by 13% by the end of the year.

Diverging Outlooks from European and US Banks

Global investment banks have sharply diverged in their market outlooks regarding the US stock market. According to Bloomberg on the 25th (local time), European banks such as the UK's HSBC and Switzerland's UBS gave pessimistic responses to the question of whether the S&P500 index, which has been rebounding over the past week, could rise further. UBS predicted that the S&P500 index could fall about 8% more from its current level. Bhanu Baweja, UBS's chief strategist, predicted, "Warning lights have already been triggered in US economic indicators," and forecasted that the S&P500 index could drop to 5300.

HSBC downgraded the rating of US stocks to 'neutral'. Max Kettner, HSBC strategist, analyzed in a letter to investors, "What we consider most important is how much the unusually high uncertainty since April 2nd will clear," and noted, "The probability seems quite low." He further pointed out, "Ongoing tariff-related controversies could have a worse impact on major US economic indicators and real economic data."

However, optimism is emerging on Wall Street that the stock sell-off is ending. The average year-end S&P500 index forecast tracked by Bloomberg for investment banks is 6539, suggesting a 13% additional upside potential compared to the closing price on that day.

Han Gyeongjae, hankyung@hankyung.com