Will S&P 500 Slump To 3,100? Here’s What Six-Decade Wall Street Veteran Has To Say

While many industry experts would not be able to ignore a 35% decline for the S&P 500, Wall Street Veteran George Ball believes such a fall to be a normal adjustment.

Sanders Morris Harris Chairman, George Ball expects the S&P 500 will bottom at 3,100 in January from its all-time high of 4,796. Ball also said that the overall outlook doesn’t seem too gloomy while admitting that the decline is going to be a little rocky. The chairman thinks so because of the massive gains the market gained after experiencing a low in the pandemic.

Ball said that everyone has the propensity to count down from the top which makes no sense, adding that the situation is more like the shedding of gains than the build-up of losses. Moreover, the chairman says a drop of 3,100 should be considered a normal cyclical adjustment, eradicating the excess of both economic stimulus and in psychology.”

Valuation multiples are recorded to be around 24-times forward earnings all the while of the easy-money era that constituted most of the pandemic period. But, this year it’s different as sentiment could be seen going down and lower and profit margins could be the next thing to decline. Ball added that the corporate earnings will prioritize moving forward, particularly since analysts were slow to amend forecasts properly, lower.

Ball said that analysts like to be adorable, especially during great times, they predict the management and companies will outperform the estimates of earnings, and therefore they experience inflation leading to the target.

Ball started his career as a stockbroker at E.F. Hutton. According to the New York Times, in 1991, Ball resigned from the position of chairman and chief executive officer of brokerage firm Prudential Bache Securities, following the $300 million in losses suffered by the firm in the span of nine years.

The Federal Reserve increased interest rates to beat the highest inflation in 40 years which led to the S&P being down by over 20% this year. Ball’s lower S&P call may be inspired by the Fed’s stricter restrictions along with the predictions for a downturn in earnings.

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