Moody's "US Stock Market Likely to Adjust 10-20% Due to Fed Hawkish Signals"

[Image source=AP Yonhap News]

[Asia Economy Reporter Kwon Jaehee] The U.S. Federal Reserve (Fed) hinted at an accelerated timeline for interest rate hikes, sending hawkish signals that have led to forecasts of an additional 20% correction in the U.S. stock market.

On the 20th (local time), Mark Zandi, Chief Economist at Moody's Analytics, said in an interview with CNBC, "The economy is strong, and the Fed needs to shift gears," adding, "A headwind is forming in the stock market."

He continued, "Investors may have started to get scared, and the market correction might have already begun."

He also noted, "The stock market is overvalued, so unlike in recent years, a rapid recovery after a sharp decline is unlikely," forecasting that "it could take about a year to return to previous levels."

Earlier, on the 16th, the Fed suggested through the dot plot released after the Federal Open Market Committee (FOMC) regular meeting that there could be two interest rate hikes in 2023.

Accordingly, the Dow Jones Industrial Average fell 3.45% for the week, marking its largest weekly drop since October last year, while the Standard & Poor's (S&P) 500 index also recorded its biggest weekly decline since February.