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The US Federal Reserve will bring down the stock market by another 20%
Fed won't stop until stocks drop another 20%, says world's largest hedge fund Bridgewater
Jan 31, 2022
1 min read
Peter JanssenMarket expert

However, Goldman Sachs sees no signs of a "bubble" in the market and no reason to panic.

The S&P 500 stock index recently fell 11% year-to-date and ended with one of the worst Januarys ever. The pressure on the stock market is exerted by expectations of a tightening of the monetary policy of the US Federal Reserve, as well as mixed financial results of companies for the fourth quarter.

After a tough press conference by Fed Chairman Jerome Powell at the end of last week's meeting, the market began to pin hopes on another, fifth, rate hike this year.

The fall in the stock market will greatly upset ordinary Americans, writes ProFinance. During the pandemic, American households bought more than $30 trillion worth of stocks. Many Americans take out loans backed by these securities to finance the purchase of new shares.

JPMorgan is not convinced that the US stock market has bottomed out after a sharp fall in January and a recovery last week. It will be possible to speak with certainty only after the massive capitulation of hedge funds and other types of investors.

The reality is that policymakers have little reason to stop the sell-off that has swept through the most speculative stocks and sent stock volatility to a 12-month high, according to Bridgewater, the world's largest hedge fund with about $150 billion in assets.

Asset values ​​have been heavily inflated due to an injection of "excess liquidity," Bridgewater notes and expects the Fed to not stop until the stock market drops another 20%.

The International Monetary Fund (IMF) also sees more trouble for global equities as central banks around the world tighten their monetary policy to curb rising inflation.

Meanwhile, Goldman Sachs believes it's time to buy back the dip, as any further dip in stocks is an upside opportunity through 2022. The stock is attractive because its valuation is now “not close” to its peak. "dotcom bubble"

Sentiment indicators, including the American Association of Individual Investor survey, are currently negative, but the market usually picks up after such periods.

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