Pro: the S&P 500 index could return to its pre-pandemic levels

A 30% decline in the S&P 500 index from its peak remains a possibility, says Seema Shah. She’s a Senior Investment Strategist at Principal Global Investors.

Shah sees more pain ahead

Shah has reasons to believe the U.S. equities have further downside from here. The earnings estimates, for one, are yet to come down. This morning on CNBC’s “Worldwide Exchange”, she said:

A lot of these declines have taken place without any drop in the earnings growth numbers. So, this is your first leg so far. As we start to see economic and earnings growth data start to turn, that’s when you get into your second leg of equity market declines.

A 30% decline, as she forecasts, would bring the benchmark index all the way back to its pre-pandemic levels.

Tech stocks to remain challenged

Shah cited macro headwinds, particularly the rising interest rate as she warned the tech stocks will likely remain under pressure in the balance of 2022. Energy, she added, will continue to outperform.

Energy has been the key upper driver and we don’t see that changing anytime soon. There will be challenges as regulations or tax holidays but energy market and commodities are probably on an upward push because of structural shortages within that industry.

Testifying to the U.S. Congress on Wednesday, Jerome Powell – Chairman of the Federal Reserve said the central bank intends to move “expeditiously” towards higher rates to depress inflationary pressures.

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