S&P 500, Nasdaq Face 10%-12% Drop as 13% Oil Surge Fuels Fed Hike Fears
Updated
Updated · The Motley Fool · Jul 19
S&P 500, Nasdaq Face 10%-12% Drop as 13% Oil Surge Fuels Fed Hike Fears
2 articles · Updated · The Motley Fool · Jul 19
Summary
A 13% weekly jump in WTI and Brent crude through July 17 has raised concern that inflation could push the Federal Reserve back to rate hikes, setting up a sharp pullback in U.S. stocks.
Across nine Fed tightening cycles in the past 40 years, the S&P 500 and Nasdaq typically fell 10% and 12% within three months of the first hike, putting both indexes into correction territory.
Midterm years have historically deepened those drawdowns: over the past 40 years, the S&P 500 has dropped an average 17% and the Nasdaq 24% at some point during such election years.
Even so, post-correction returns have been strong. After first closing 10% below a high in the last decade, the S&P 500 gained an average 18% over one year and 40% over two; the Nasdaq returned 21% and 39%.
JPMorgan says 7 of the market's 10 best days in the past 20 years came within 15 days of the 10 worst, reinforcing the case for staying invested and buying dips rather than trying to time a bottom.