US stocks have fallen in the past three weeks as signs of persistent inflation stoked fears that the Fed could keep interest rates higher for longer. The first quarterly drop in corporate profits since 2020 has also dampened demand for risky assets, and Wall Street market strategists including Morgan Stanley’s Michael Wilson have warned that stocks could see steep declines over the coming months.
Bank of America’s Hartnett reiterated his view that the S&P 500 could slide to 3,800 points by March 8, implying falls of more than 5% from its last close. The strategist’s recommendation is supported by expectations that growth resilience in the first half of the year will coincide with higher interest rates and lead to a sharper economic slowdown in the second half.
Contrasting with the general trend, BofA’s private clients made the largest additions to shares in eight weeks.
Across regions, emerging market equity funds attracted $2.1bn for the week, while US stocks saw writedowns for the third straight week of $9bn. Outflows of European funds also resumed. By investment style, US small-cap and value stocks saw additions, while money left large-cap and growth stock funds. Energy led sectoral inflows, and materials and financials posted the largest outflows.
