Several Wall Street research firms have warned that the S&P 500 (SPX) is due for a correction following a furious rally since the April low of 4,835. The benchmark index trades at 6,316 at the time of writing, up by 30% since April.
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Morgan Stanley (MS) strategist Mike Wilson believes that the S&P 500 could fall as much as 10% as consumers begin to feel the effects of tariffs.
“Over the last couple of weeks, we have noted that investors should expect a modest pullback in the third quarter,” said Wilson in a note to clients.
Evercore ISI Floats Possibility of 15% Correction
Evercore ISI (EVR) believes that the index could drop by up to 15% as euphoria takes hold among investors. In addition, Deutsche Bank (DB) says that a pullback is overdue following three months of strong returns.
Negative seasonality is also a risk. During the past three years, the S&P 500 has historically performed the worst in August and September with average losses of 0.7% in each month, according to Bloomberg.
The S&P 500 has returned 10.40% during the past three months.
