The S&P 500 could sink 20% this spring, followed by a robust recovery, surging to an all-time high by December of 2024, according to an investment strategist. 

S&P 500 Could Slump 20% This Spring

During Rosenberg Research's latest webcast, Marko Papic, the partner and chief strategist at Clocktower Group, predicted a downturn in the benchmark US stock index this spring as a recession sets in, Business Insider reported.

However, he also expressed confidence in a strong comeback once the Federal Reserve initiates interest rate cuts to stimulate the economy. 

(Photo : Scott Olson/Getty Images)
CHICAGO - MARCH 18: Traders signal offers in the Standard & Poors 500 stock index futures pit at the CME Group March 18, 2009 in Chicago, Illinois.

While foreseeing a significant equity drawdown from January to May of 2024, Papic emphasized that the decline would be swiftly undone.

"I think that what we have over the course of the next 12 months is the most extraordinary and unnecessary easing by a Fed not commensurable to the depth of the recession... And I think the S&P 500 will end up much higher than 5,000 by the end of the year," he noted.

The US has experienced inflation that rose to a 40-year high of over 9% last year. In response, the Fed raised rates from near-zero to more than 5% in under 18 months.

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Bearish Outlook

Marko Papic expressed a bearish outlook for the next two quarters, suggesting that the US is amid a growth slowdown. He also cited some potential challenges, such as Republican lawmakers unlikely to pass spending bills and companies pulling back on capital investments after pandemic-driven expenditures.

Papic also speculated about the Fed potentially cutting rates hard next year to support President Joe Biden's reelection bid and maintain price stability. He noted that if the Fed overcuts for political reasons, "it will set the economy back on fire."

And if the US does have a recession at any point over the next 10 months and the Fed overcuts, Papic said "it will light the cycle back up in extraordinary ways." In the face of uncertainties, Papic emphasized the robust financial condition of US consumers, who are the driving force behind the economy.

He noted that numerous households have been hoarding cash, ready to be utilized in the real estate market when a recession occurs and prices experience a decline. 

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