Back in mid-April, Kolanovic said sentiment and positioning are too bearish, and advised investors to buy growth stocks including tech, biotech and innovation, alongside value stocks like metals and mining. The Nasdaq 100 index has ended every single week since then in the red.

For bears, such as Bank of America Corp.’s equity strategy team, the selloff may continue until October, and the S&P 500’s fall below 4,000 index points may tip it into a more severe rout as investors flee. Morgan Stanley’s Michael Wilson has said the “S&P 500 has minimum downside to 3,800 in the near term and possibly as low as 3,460.”

European stocks's valuations are now below their long-term average
Much of that concern is tied to the economic backdrop, and the growing risk of stagflation looming large over the investment outlook. Even the long tradition of markets outperforming during earnings seasons has been challenged. While corporate profits both in Europe and the U.S. came in again above expectations, the beats have failed to assuage broad concerns.

“We have a perfect storm at the moment -- inflation, Ukraine war, zero Covid policy in China, normalization of monetary policy,” said Vincent Juvyns, a global market strategist at JPMorgan Asset Management. Still, he insisted, “a lot is priced in at the moment” and “we may soon hit the bottom.”

-With assistance from Sagarika Jaisinghani and Anna Edwards.

This article was provided by Bloomberg News.

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