The S&P 500 could fall around 10% and 'retest 3,000' if US lawmakers fail to clinch a new stimulus deal, one CEO says
- The S&P 500 could shed around 10% and retest the 3,000 mark, Anthony Denier, CEO of Webull told Business Insider.
- He said: "The lack of a deal could take away a lot of the stock market's optimism and could send the S&P down another 10%."
- The House passed a $2.2 trillion Democratic fiscal plan Thursday, but it still unlikely to garner support from the Senate.
- Strategist Edward Moya of OANDA thinks stocks will hardly budge if lawmakers don't agree on another bill, but a deal will trigger a rally.
- Moya said: "If Pelosi and Mnuchin hammer out a deal, stocks will rally, but will not be able to recapture record high territory until we are beyond the election results."
The S&P 500 could shed around another 10% and flirt with the 3,000 mark if US lawmakers fail to agree upon more fiscal stimulus, Anthony Denier, CEO of trading platform Webull said.
Denier told Business Insider: "Without stimulus, demand may dry up, which could have a huge negative effect on the economy. The lack of a deal could take away a lot of the stock market's optimism and could send the S&P down another 10%."
Asked how low the index can go without stimulus, Denier, said: "That's the $64,000 question."
Denier said he sees the index re-testing the 3,000 level.
The S&P 500 has recovered from its first monthly drop in six months in September. It opened lower on Friday after US president Donald Trump and his wife both announced they tested positive for COVID-19, but still the index is up around 2% on a weekly basis.
The index has not traded as low as 3,000 since May, so if realized, Denier's predictions could send the S&P 500 tumbling to a near five-month low.
On Thursday, the House passed a $2.2 trillion Democratic coronavirus stimulus plan, but the bill is unlikely to pass through the Republican-led Senate.
The vote came after a conversation on Thursday between House Speaker Nancy Pelosi and Treasury Secretary Mnuchin, in which they agreed to continue talks. Earlier this week both agreed that the next fiscal plan should include federal checks.
US lawmakers have been in a stalemate since July over the size of the next package.
Market watchers have largely priced in a scenario where lawmakers will only agree on a deal after the election, but Denier thinks there is still a chance of both parties clinching an agreement before Election Day.
"I think president [Donald Trump] may want to have another win under his belt going into the election. Not just to show his leadership and ability to help people, but a new deal will lift the stock markets," he said. "If it doesn't happen before the election, it won't happen before January."
But Edward Moya, senior market analyst at OANDA, sees "limited downside" for the S&P 500 even if stimulus talks, and thinks the index will shed a "few percentage points at most."
He thinks the biggest risk to US stocks is the potential of a contested election between Republican president Trump and democratic nominee Joe Biden.
"The biggest risk to the S&P 500 is if we have to wait a couple weeks to get the election results and then it becomes a contested election," he said. " If Pelosi and Mnuchin hammer out a deal, stocks will rally, but will not be able to recapture record high territory until we are beyond the election results," he concluded.
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