Is the stock market headed lower? Experts weight in

The Nasdaq 100 (^NDX) shed 5.7% this week alone. The S&P 500 shed 4.7% over the last five days, following a hotter than expected inflation print coupled with grim warnings from package carrier bell FedEx (FDX).

In continuation of our series, “What to do in a bear market,” Yahoo Finance asked the experts if the markets are headed lower from here.

The Nasdaq Composite (^IXIC) got hit particularly hard this week. What’s next for the tech heavy index?

The Nasdaq took out last week’s low of 11,900, notes Fiona Cincotta, senior financial markets analyst, at City Index.

“There is more downside to come,” she said on Friday. So, how much further?

“Sellers will look towards support around 11,430 ahead of 11,036, the 2022 low. On the flip side, a rise above 12,650, the falling trend line resistance, would open the door to 12,900, the weekly high,” she continued.

What about the S&P 500 (^GSPC) ?

The broader market index closed below 3,900 on Thursday, prompting accelerated losses that afternoon and more declines on Friday.

“The S&P 500 is continuing to head lower ahead of next week’s FOMC meeting, as investors worry that a hawkish Fed in a weakening economy, threatens recession,” said Sam Stovall, chief investment strategist at CFRA Research.

Is the S&P 500 going to take out its June 16th lows?

“The S&P 500 is approximately 6% above the year-to-date low reached in the middle of June. History suggests, from a technical and market sentiment standpoint, the previous lows may need to be tested and hold to establish new support from which the market can advance,” Bill Northey, senior investment director at U.S. Bank Wealth Management, told Yahoo Finance.

Ann Berry, founder of Threadneedle Ventures told Yahoo Finance Live, said she thinks “the worst is yet to come.”

“I think the S&P could see another 10-15% correction downwards unfortunately. And I think that really is exposed to downside risks depending on how energy prices continue to trend especially internationally,” she said.

Ross Mayfield, investment strategy analyst at Baird, acknowledges the probability of falling below the June 16th level has risen.

“At this point, I’d still be somewhat surprised if the June lows were taken out, but the odds have certainly increased as inflation has proven stickier than hoped,” he said.

How should investors be positioned if the markets go lower?

“High quality and defensive companies tend to outperform in these environments. A focus on cash flow generation, high quality management, and earnings stability should be rewarded. Sectors like Utilities and Staples have gotten expensive but do provide defensive characteristics,” said Mayfield.

“We also like Healthcare as a late-cycle growth play,” he added.

Meanwhile Northey of U.S Bank Wealth Management said, At present, we recommend an underweight position in global equities relative to long-term targets and a corresponding overweight position to fixed income and global infrastructure.”

He added, “Within fixed income, the emphasis is on high-quality investment-grade taxable and municipal bonds as well as a dedicated exposure to short-term U.S. Treasury investments to manage overall risk exposure should interest rates continue to rise.”

Which sector can we expect to be impacted from further downdrafts?

“During this decline, as well as should the June 16 low not hold, the defensive (consumer staples, healthcare, and utilities) sectors will continue to be relative outperformers, while communication services, consumer discretionary, and tech will be underperformers,” said Stoval of CFRA Research.

Ines is a markets reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre

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