3 Reasons Market Could Get Worse Before It Gets Better

What You Need to Know

The market hasn’t fully priced in a recession, said Jill Carey Hall.
BofA sees more upside potential in small cap stocks, she said.
It’s a better year for active than passive management, she added.

The stock market hasn’t fully priced in a 2023 recession and could slide near term before rebounding, a key Bank of America strategist said Thursday, noting the investment firm expects the S&P 500 to end the year at 4,000, slightly under its current level.

At the same time, Jill Carey Hall, head of U.S. small- and mid-cap strategy at Bank of America Global Research, didn’t rule out the possibility that the index could end the year much lower.

“Four thousand’s our year-end target and as a downside risk we’ve certainly thought as a bear case the market could go into the low 3,000s, but our base case, we end the year at 4,000,” she said on CNBC’s “Squawk Box.”

“There could be more downside risk near term. Heading into the year, sentiment had been very poor … we obviously saw the big January rebound but there’s risk we could see volatility from here,” she added.

3 Economic Predictions

Here’s what BofA expects for the rest of the year:

1. Two more rate hikes from the Federal Reserve.

“I think right now the focus is going to be on the economy and the backdrop,” Carey Hall said.

2. A mild recession to start in the third quarter.