Senior Analyst: Three major negative factors are pressuring, US stocks will see a pullback

According to the latest information from Zhitong Finance, Sam Stovall, Chief Investment Strategist at CFRA Research, stated that the US stock market is expected to experience a pullback due to three major unfavorable factors. This Wall Street veteran pointed out that the stock market has been strong so far this year, with the S&P 500 index rising by 15% in 2024. However, he predicts that due to negative factors such as interest rates, inflation, and stock valuation, the benchmark index will decline by 5%. While the inflation rate is decreasing, it remains above the Federal Reserve's target of 2%, leading Fed officials to expect only one rate cut by the end of this year. The rise in interest rates has caused the 2/10-year US Treasury yield curve to invert for the longest period in history, a well-known indicator in the bond market predicting an upcoming recession. When the yield on the 2-year Treasury exceeds that of the 10-year Treasury, this indicator flashes. Historically, this indicator has been a reliable signal of a recession, and economists suggest that this time may not be any different. Stock valuations are also at high levels by historical standards, implying a downward trend in the future. Stovall pointed out that compared to the average price-earnings ratio of the past 20 years, the S&P 500 index is currently trading at a premium of 32%. Tech stocks, which have dominated the market in recent years, are currently trading at a premium of 68%. Stovall recently stated, "I think we are really nervous, to prove this point, we have to revise earnings expectations upwards." Stovall added that tech stocks may experience their first "ice crack," noting that the valuations of large-cap tech stocks are too high. He said, "The only ones outperforming the market are tech stocks. It's like a large jet plane flying with only one engine, and you wonder how long it can stay in the air." Other forecasters have warned that as the stock market (especially tech stocks) continues to rise, there is limited upside potential in the market. Elite investor John Hussman warned that based on a valuation indicator, the stock market appears to be at its most overvalued level since 1929, which could pave the way for a significant market correction