S&P 500 now down 24% YTD: expert says multiples are still too high


S&P 500 now down 24% YTD: expert says multiples are still too high

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Wajeeh Khan

Jun 16, 2022

Dan Niles says multiples have to come down a lot more for the market to bottom.

Josh Brown on CNBC’s “Halftime Report” agreed we haven’t seen the worst yet.

The benchmark S&P 500 index is down another 4.0% on Thursday morning.

U.S. equities slid another 4.0% to a new 52-week low on Thursday after the U.S. central bank announced its biggest rate hike since 1994. Still, Dan Niles warns the worst is not over yet.

Niles reiterates his bearish call

According to the Founder of Satori Fund, multiples are still too high to call a bottom. Quoting historical data to defend his view, he said this morning on CNBC’s “TechCheck”:

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When CPI is above 5.0%, S&P trailing PE is 12 times. If somehow you get below 3.0% in the near-term, the trailing PE multiple is 15 times. You’re at 19. To get from 19 to 15, you have to go down 20%. To get to 12 times, you have to go down 35%.

He reiterated his call for an eventual 30% to 50% decline in the S&P 500 index from its peak.

Ritholtz’ Josh Brown agrees

Who shares his “more pain ahead” outlook is Josh Brown. The CEO of Ritholtz Wealth Management is convinced there’s no way the Fed can engineer a soft landing. On a separate CNBC interview, he said:

We talk about the transition of economy from items to services. But services are very small in S&P 500 earnings. So, it’s hard to say that having earnings up 8.0% – 9.0% this year is realistic. We have not seen the worst yet.

Mortgage rates and the housing market at large, Brown added, suggests the new couple of quarters will be rough.

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