Academy Securities' Peter Tchir stated the stock market will fall 10% for three reasons. Rising bond yields, sticky inflation, and a weakened US consumer make him "increasingly nervous."
Instead of thinking about a 5% to 10% pullback in stocks, I'm much more concerned about a 10% or higher pullback along with 10-year yields breaking through 4.5%." One market analyst worries about a huge stock pullback. Academy Securities strategist Peter Tchir believes US markets might fall 10%.
Instead of thinking about a 5% to 10% pullback in stocks, I'm much more concerned about a 10% or higher pullback along with 10-year yields breaking through 4.5%," Tchir said in a Sunday note. Three reasons make him "increasingly nervous."
He recommends starting with bond yields. Tchir said 10-year Treasury yields had crept up to 4.33% and may continue to rise. The bond market could replicate last fall's spectacular meltdown.
"I've been expecting to see another march to higher yields like we saw last fall," he said. "The 10-year yield moved higher each and every day last week – a sign of things to come?"
The 10-year yield last hit this level in February, triggering a bond rally. However, the Fed is becoming more hawkish on rate decreases. After inflation has outperformed expectations, Wall Street is whispering about no rate cuts or even boosts.
This leads to Tchir's second reason: inflation. He sees rising inflation as persistent. Geopolitical threats, such as the Ukraine war and Iran's possible involvement in the Middle East conflict, might keep energy prices high and inflationary.
Third, US consumers. Tchir stated they've been acting like "zombies," reviving. This will change as they succumb under growing debt and a weakening job market. The hazards require "DEFCON 2 level of bearishness," he warned.
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