$16 trillion and counting: Investors warned to brace for more pain

A mass exodus of money, an $US11 trillion ($16 trillion) wipeout, and the worst losing streak for global stocks since the 2008 financial crisis. The bad news is that it may not be over yet.

The selloff in the MSCI ACWI Index has dramatically lowered valuations of companies across the US and Europe, but strategists ranging from Michael Wilson at Morgan Stanley to Robert Buckland at Citigroup expect stocks to fall further amid worries of high inflation, hawkish central banks and slowing economic growth, especially in the US.

Money is continuing to leave every asset class and the exodus is deepening as investors rush out of names like Apple, according to Bank of America. Historically significant technical levels for the S&P 500 show the index has room to fall nearly 14 per cent more before hitting key support levels, while the share of companies that have so far hit a one-year low is still a far cry from the number during the economic growth scare that slammed stocks in 2018.

“Investors continue to reduce their positions, particularly in technology and growth stocks,” said Andreas Lipkow, a strategist at Comdirect Bank. “But sentiment needs to deteriorate significantly more to form a potential floor.”

On the other side, some say the rout has already created pockets of value across sectors including commodities and even technology, which is valued on future earnings growth and, therefore, generally shunned during periods of high interest rates. The Nasdaq 100 rallied on Friday, but it still closed the week down over 2 per cent.

Goldman Sachs’s Peter Oppenheimer has been among the most high-profile strategists to say it’s time to buy the dip, while Thomas Hayes, chairman at Great Hill Capital LLC, said “old school tech” stocks including Intel and Cisco Systems were now trading at attractive multiples.

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But amid the morsels of value, the broader market looks to be buckling as recession creeps more and more into the conversation. And even as growth worries mount, the inflation focus at the Federal Reserve and other central banks means investors can’t count any more on the monetary elixir that’s helped to keep alive the long-running bull market.

The MSCI ACWI has fallen for six straight weeks, the Stoxx Europe 600 is down 6 per cent since late March, while the S&P 500 has dropped more than twice as much.