S&P 500 made a new 52-week low on Friday but famed investor Jim Cramer warns the bears are not in a mood to “hibernate” just yet.
Economy is still too hot
On “Mad Money”, he said the volatility index has not responded as strongly to the recent, “hideous” sell-off in the S&P 500 as one would expect, which suggests further downside.
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I think we may need to see a lot more red before all this is over because the economy is still just so hot and the U.S. Federal Reserve very much wants the market to go lower. And you can’t fight the Fed.
Yield on the 2-Year Treasury at 4.20%, poised to climb further, Cramer said, also signals the same.
On September 21st, the U.S. central bank pointed to a terminal rate of 4.6% in 2023 in the wake of the economy keeping hot. (source)
How low could the S&P 500 go?
Cramer agreed the possibility of a short-term rally remains on the table but recommends that investors use it to pull out if it materializes.
His comments were predicated on data from Mark Sebastian (market technician) who warns of a continued risk-off in the benchmark index until it returns to its pre-pandemic 3,386 level.
Sebastian says volatility index and bond market are pointing to lower stock prices. In his view, it’s absolutely not the time to go long. He’s waiting for S&P to go down while the VIX also goes down; classic tell that sell is coming to an end.
A stock he recommended this evening, though, is Vail Resorts Inc (NYSE: MTN) after it reported encouraging results for its fiscal fourth quarter. Shares are currently down about 30% for the year.
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