How Low Will Stocks Go?

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The Balance is here to help you navigate your financial life. To that end, we track the money-related questions you most search on Google so we know what’s on your mind. Here’s the answer to your latest question about stock prices. 

How low will stocks go?

It’s impossible to say for sure. But analysts have studied market data and historical trends to offer their best guesses about how stocks may perform in the future.

With investors spooked by higher inflation and interest rates, soaring energy costs, and the war in Ukraine, the major indexes continued losing steam this week. The benchmark S&P 500, which so far this year has had its worst performance since 1970, at one point Friday fell to 3,810.32, smack into bear market territory—meaning it was down at least 20% from its recent peak (in January)—before closing back up at 3,901.36.

The Nasdaq Composite, which first crossed into bear territory in early March and has been there every day since May 5, shed another 33 points Friday to finish at 11,354.62. And the Dow Jones Industrial Average ticked up almost 9 points to 31,261.90—still down 15% from its recent peak (which also was in January).

The S&P could fall another 18% from where it was Wednesday before hitting the bottom, according to a Goldman Sachs analysis released that day. That would bring the index all the way down to 3,360. Goldman analyzed stock performance during 12 economic recessions since World War II, when stocks fell an average of 30% during those periods. (Even though the U.S. is not in a recession, the firm's analysts say there's a 35% chance of entering one over the next two years.) Using the “mean” drop of 24% from peak to trough during those recessions, the S&P would sink to 3,650, according to Goldman’s analysis.

Other firms are also forecasting the S&P to continue dropping. Earlier this month, Morgan Stanley analyzed company earnings to predict the index could fall to at least 3,800, and possibly go as low as 3,460. And a report from Bank of America forecast the S&P falling as much as 37% from its peak, sending it down to around 3,000.

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Article Sources

  1. Yahoo Finance. “S&P 500.”