S&P 500: Wall Street banks see index drop by year-end

market black bear in front of financial price chart

It is predicted by the majority of major banks that the S&P 500 will decrease by the end of the year.

It is unlikely that the stock market will experience an increase in the next six months due to various factors.

The risk of a US recession occurring or not occurring is one of the risks.

In the first half of 2020, the S&P 500 US broad market index rose by an impressive 15.9%, making it the best first half since 2019. However, most Wall Street banks anticipate that the US stock market will not be able to sustain its growth in the second half of the year and will end the year lower than its current levels.

According to a poll conducted by CNBC, RBC reports that 9 of the 15 strategists from the biggest investment banks anticipate that the S&P 500 index will drop by the end of 2020.

The experts surveyed anticipate that the S&P 500 will be at 4255 points by the end of the year, representing a 6% decrease from mid-July. Only 4 of the respondents expect the index to be slightly higher than it is now.

Bank of America warned that the stock market could fall rapidly if the major stocks that have been driving it this year start to decrease in value.

Citi expects that the S&P 500 will remain close to its current levels, and that more stocks, not just big tech stocks, will increase in value.

Wells Fargo predicts that the S&P 500 will experience "volatile sideways" movement until the end of the year, with the index expected to be between 4000-4200 points. Nomura has warned of an even greater downside risk for the NASDAQ 100 technology index.

UBS has warned that the stock market could be at risk if the Federal Reserve continues to raise interest rates, consumer spending decreases, and the US economy enters a recession.

Investec has suggested that even if the US economy does not enter a recession, the stock market could still be affected. They point to a strong US labor market, which could lead to higher and more stable inflation than investors anticipate. This, in turn, would cause Treasury yields to rise, putting pressure on growth stocks.