S&P 500 now down 24% YTD: expert says multiples are still too high

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on Jun 16, 2022
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  • Dan Niles says multiples have to come down a lot more for the market to bottom.
  • Josh Brown on CNBC's "Halftime Report" agreed we haven't seen the worst yet.
  • The benchmark S&P 500 index is down another 4.0% on Thursday morning.

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U.S. equities slid another 4.0% to a new 52-week low on Thursday after the U.S. central bank announced its biggest rate hike since 1994. Still, Dan Niles warns the worst is not over yet.

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Niles reiterates his bearish call

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According to the Founder of Satori Fund, multiples are still too high to call a bottom. Quoting historical data to defend his view, he said this morning on CNBC’s “TechCheck”:

When CPI is above 5.0%, S&P trailing PE is 12 times. If somehow you get below 3.0% in the near-term, the trailing PE multiple is 15 times. You’re at 19. To get from 19 to 15, you have to go down 20%. To get to 12 times, you have to go down 35%.

He reiterated his call for an eventual 30% to 50% decline in the S&P 500 index from its peak.

Ritholtz’ Josh Brown agrees

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Who shares his “more pain ahead” outlook is Josh Brown. The CEO of Ritholtz Wealth Management is convinced there’s no way the Fed can engineer a soft landing. On a separate CNBC interview, he said:

We talk about the transition of economy from items to services. But services are very small in S&P 500 earnings. So, it’s hard to say that having earnings up 8.0% – 9.0% this year is realistic. We have not seen the worst yet.

Mortgage rates and the housing market at large, Brown added, suggests the new couple of quarters will be rough.

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