S&P 500 selling “to pick up”

The S&P 500 fell 2.5 percent last week, its second consecutive weekly decline, and some analysts think that it could fall further in the coming weeks.

Tim Hayes, senior investment strategist at Ned Davis Research, told Business Insider that he expects a 15-20 percent decline.

“Right now valuations and sentiment have priced in a much better economic and earnings outlook than we are seeing and than what is coming through the numbers. That is becoming a motivation for the momentum selling to pick up,” said Hayes.

However, Hayes thinks that the S&P 500 will stage a rally later once the US presidential election in November is out of the way.

“Once you get past the US election the uncertainty will clear up and by then market valuations may look better,” he said.

Paul R La Monica at CNN Business noted that most S&P 500 stocks had in fact been having “a pretty tough 2020”.

“Nearly 60% of the companies in the index were in the red for 2020 through Thursday's close, according to data from Refinitiv,” he wrote.

“Without Big Tech's influence, the broad market would not look quite as stable as it does today,” he quoted analysts from Zacks Investment Research as saying.

“The recent imbalances in the stock market can lead to vulnerability,” said Jeff Kleintop, chief global Investment strategist for Charles Schwab.

However, UBS said in a note on Friday that the market decline will likely be short-lived.

UBS noted that the trend in economic data “remains positive”, with the most recent Citi Surprise Index reading at 86.

In addition, UBS thinks further fiscal and monetary stimuli are possible, noting that the Federal Reserve's recent inflation policy overhaul “signals the Fed's greater willingness to tolerate inflation overshooting the 2% target before tightening policy”.