Stock-market selloff may mean another 20% drop for S&P 500, says Wall Street veteran

“I generally believe that interest rates will continue to rise and that inflation will not fall as much as expected.”


— Thomas Peterffy, CEO and founder of Interactive Brokers

Thomas Peterffy, Chairman and Founder of Interactive Brokers Group Inc. IBKR,
+5.80%,
believes the S&P 500 index could fall nearly 20% from Wednesday’s levels to a low of around 3,000.

The S&P 500 SPX,
-0.97%
is down 22.2% year-to-date. The large-cap index closed on October 12 this year at its lowest level since November 2020. The stock market then performed a massive trend reversal with the Dow Jones Industrial Average DJIA,
-0.56%
It posted its largest one-day percentage gain since November 2020 after falling nearly 550 points from its session low.

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The market veteran also said inflation will not fall as much as expected and interest rates will continue to rise.

“Both interest rates and inflation rates are going to settle between 4% and 5% and we’re going to get into economic stagflation,” Peterffy told CNBC’s “Squawk Box” on Wednesday.

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The CPI rose 0.4% in September, ahead of the consensus forecast of 0.3% polled by Dow Jones. Excluding volatile food and energy prices, core CPI is even more concerning, rising 0.6% vs. 0.4% estimate.

See: According to Deutsche Bank, financial markets are still underestimating inflation risks despite seven consecutive annual CPI readings above 8%

That way, the buy-and-hold strategy won’t “pay off,” he said.

“People better roll up their sleeves and start doing research and trying to identify companies with great business prospects and good management,” Peterffy said. “It won’t be that easy.”

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Interactive Brokers IBKR,
+5.80%
reported its adjusted earnings for the third quarter that beat consensus estimates for earnings per share. The electronic brokerage reported adjusted earnings per share of $1.08 compared to FactSet’s estimate of 96 cents, while adjusted earnings were $847 million compared to consensus of $797 million.

US stocks were mixed on Wednesday, with the S&P 500 down 0.2%, while the Dow was up 0.1% and the Nasdaq Composite COMP.
-9.49%
fell by 0.3%.

Read: 1987 stock market crash marks its 35th anniversary: ​​what investors can learn from “Black Monday”.

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