S&P 500 on the verge of a bear market

Vrasidas Neofytou
Head of Investment Research

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The main theme of recession threats, rising inflation, and monetary tightening has triggered a larger market sell-off, placing stock markets on the verge of a bear market.

The S&P 500 is nearly 20% below its all-time highs, indicating a bear market, while the Dow Jones is down 15% following its first eight-week losing run since 1923.

The Nasdaq Composite, on the other hand, has already entered bear market territory, falling roughly 30% from its highs as the sell-off losses were concentrated in highly valued growth and technology stocks.

Investors are concerned about companies' capacity to maintain earnings growth at a time when rising interest rates, energy expenses, and lower consumer demand will cut profitability.

Bond traders are also apprehensive that the Federal Reserve may implement numerous half-point interest rate hikes in the coming meetings to bring inflation expectations under control.

Overall, the financial markets have experienced their biggest downturn of this magnitude since the quick bear market in March 2020, at the beginning of the pandemic.

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