S&P 500 hasn’t had such a bad first half since Nixon

The S&P 500 is set to post its worst first half since Richard Nixon’s presidency.

With just seven trading days remaining in June, the index is down 21% since the beginning of the year amid expectations that a toxic combination of high inflation and a tightening Federal Reserve will drive the US economy into a recession. The last time the S&P 500 it fell that much during the first six months of whatever year it was in 1970, according to data compiled by Bloomberg.

According to Manish Kabra, a strategist at Société Générale SA, a 1970s-style inflation shock could see the index plunge 33% from current levels to 2,525, amid stalling with higher inflation. The key interpretation of the 1970s is the risk that, if investors begin to believe that inflation will stay high longer, equity markets will begin to focus on the real rate of earnings per share rather than the nominal rate. , which for this year is likely to be negative, SocGen said.

The S&P 500 plunged into a bear market early last week before rebounding sharply on Tuesday. However, US futures indicated on Wednesday that the rebound may be short-lived. Traders are bracing today for Fed Chairman Jerome Powell’s Senate testimony, where he is expected to reinforce a commitment to fight price pressures.