About 9.0% of the S&P 500 companies have reported their quarterly results so far and roughly 70% of them have positively surprised.
But that’s not a catalyst enough for the market to pull out of the ongoing downtrend, says Thomas Peterffy – Chairman of Interactive Brokers Group Inc.
Sticky inflation and aggressive rate hikes, he noted, will eventually push the U.S. economy into a stagflation, creating more pain for the equities market. On CNBC’s “Squawk Box”, he said:
Rates will continue to go higher and inflation won’t come down as much as expected. I think both interest rates and inflation will settle down between 4.0% and 5.0%, and we’re going to go into a stagflationary economy.
Last week, consumer prices were reported up 0.4% in September, reiterating once again why the Fed needs to remain hawkish.
S&P 500 has lost about 15% over the past two months. Still, Peterffy warns the bottom is not in yet.
He sees possibility of a further descent to around 3,000 level. That suggests another 20% down from here. Explaining how to play such a market, the IBKR Chairman added:
Buy and hold strategy is not going to be very rewarding. People better begin to research and identify companies with great business prospects and good management. It’s not going to be so simple.
Also on Wednesday, Interactive Brokers reported market-beating results for its fiscal third quarter even though continued market volatility had trading volume slip 11% on a year-over-year basis.
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