Tags: Newedges Lawrence McDonald | stock market | share prices | investors

Newedge's McDonald: Stocks Headed Down at Least 10 Percent

By    |   Sunday, 12 October 2014 12:45 PM

The S&P 500 index has slid 4.8 percent from its Sept. 19 record high of 2,019.26, and the decline isn't yet half over, says Lawrence McDonald, head of U.S. macro strategy at Newedge brokerage.

He told MarketWatch he expects a drop of 10 percent or more. That would leave the S&P 500 no higher than 1,817. It closed at 1,906.13 Friday afternoon.

So why will the slide continue?
  • U.S. oil prices have dropped to two-year lows, and oil and gas companies make up a large part of the S&P 500, McDonald notes.
  • The dollar's strength — it rose to a six-year high against the yen and a two-year peak against the euro last week — will damage the earnings of U.S. multinational companies, he says.
  • Investors are concerned that global economic weakness will weigh down the U.S. economy, McDonald says. Federal Reserve policymakers have expressed similar worries.

"Between now and year-end, you buy fear and sell rallies," he says.

Others say investors are nervous too. "Clients are anxious for sure, given the growth slowdown chatter that seems to be growing," Manish Singh, a portfolio manager at Crossbridge Capital, told Bloomberg. "The move in the market lacks conviction. We’re telling clients to stay put."

While the U.S. economy expanded 4.6 percent in the second quarter, the eurozone registered zero growth, and Japan's economy contracted 7.1 percent.

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The S&P 500 index has slid 4.8 percent from its Sept. 19 record high of 2,019.26, and the decline isn't yet half over, says Lawrence McDonald, head of U.S. macro strategy at Newedge brokerage.
Newedges Lawrence McDonald, stock market, share prices, investors
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2014-45-12
Sunday, 12 October 2014 12:45 PM
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