Yahoo Finance Bears on parade: Wall Street market downgrades just beginning
Is a new reality dawning on Wall Street? Some major financial institutions are now cutting their once bullish market forecasts after August’s steep drop. Morgan Stanley (MS) dropped its S&P 500 (^GSPC) target today, citing slowing growth and a looming Fed rate hike. This followed a similar cut by Credit Suisse (CS) last week, which trimmed its year end S&P 500 forecast to 2,100.
As the bears rise from their slumber at the big banks, Kathy Boyle of Chapin Hill Advisors believes their roars will start getting louder. “I think [Wall Street banks are] going to have to continue to lower their sights down unfortunately,” she says in the attached video. “Wall Street is a distribution mechanism - they make the most money from their investment banking side, where they create products basically whether they’re mutual funds or ETFs… So you're never paid to be bearish on Wall Street.”
Get the Latest Market Data and News with the Yahoo Finance App
However, when as she says the “horse is out of the barn” and capitulation hits, even the most bullish analysts will have to start lowering their targets. But this could create a buying opportunity after all the selling has been flushed from the market.
“We've had a very low lack of volatility and very few negative quarters over the last several years, so this has been unusual, but, most of the time you do see 10% corrections and then a rally up,” she notes. The fear here is that the downside which the market is experiencing today could get more severe, because of the fact that there haven’t been many rough patches during the current bull market.
Given what the market’s seen over the past several weeks, Boyle’s advice to regular investors is to not to overreact and do what worked in the past. She calls this “driving in the rear view mirror.”
“[Investors] tend to look behind so they always want what worked in the past, and unfortunately a lot of them got in a little bit too late on some of the hot stocks, and then when the institutions start to dump, you just need to get out of their way,” she notes. It’s at times like this that having an advisor can help investors determine their long term priorities and risk appetite.
“So you have to be very careful, reacting and selling into the market,” she concludes. “You really need to look at your portfolio and make sure that the portfolio is in line with your risk tolerance.”
More from Yahoo Finance
Why Tesla wants Obama’s help in China
Why ‘Flash Boys’ are here to stay
Crouching Tiger, Hidden Dragon: Time Warner’s sneaky China play
