“Money Printer Go Brrr” featured a Rambo-esque Jay Powell, chairman of the US Federal Reserve, determinedly issuing greenbacks to anyone who could take them. Well, now “Jay Powell Go Grrr” would be more appropriate. Trader-friendly monetary watchfulness has turned into a snarling bear for rising interest rates. And investors aren’t happy. The Nasdaq Composite COMP, -6.15% , rich in stocks – Apple, Tesla, Nvidia – formerly beloved of short-dated options buyers, has fallen 29.3% this year and is flirting with summer lows again. The latest AAII Sentiment Survey shows individual traders at their most pessimistic since 2009. Now Goldman Sachs is citing Powell’s projected rate hikes as reason to cut its year-end S&P 500 target SPX, -0.84% from 4,300 to 3,600. “The expected path of interest rates is now higher than we previously assumed, which skews the distribution of equity market results below our previous forecasts,” David Kostin, Goldman’s chief U.S. equity strategist, wrote in a note. When Goldman cut its year-end price target for the S&P 500 in May from 4,700 to 4,300 (it started the year at 5,100), the market expected the Fed to end its hiking cycle around 3.25%. Now traders estimate the so-called terminal rate to be 4.6%, and Goldman economists see a possible top Fed funds rate as high as 4.75% by next spring. That is pushing real 10-year Treasury yields up sharply, and Goldman notes they have risen from minus 1.1% at the start of the year to 1.3%, the highest since 2011. The bank predicts they could reach 1, 25% by the end of 2022, before peaking at 1.5%. This is not good for stocks. Source: Goldman Sachs “The relationship between stocks and interest rates is dynamic,” notes Kostin. “The drivers of changes in real returns determine the impact on stock valuations. The increasing weighting of high-growth technology companies in the index also increased its duration and percentage sensitivity.” The S&P 500’s forward price/earnings multiple, which was 21 at the start of the year when real interest rates were negative, has fallen to 16 currently. “However, in recent weeks, the relationship has shifted. Equity valuations have declined from their recent peak, but are still trading above the level implied by the recent relationship to real interest rates. Based solely on recent relative to actual returns, the S&P 500 should be trading at a multiple of 14x instead of its current multiple of 16x,” says Kostin. Hence the reduction in its target price. The good news is that 3,600 is only 4.1% lower than Thursday’s close. And Kostin reckons a year-end rally to 4,300 “is possible if inflation shows clear signs of easing.” Source: Goldman Sachs The bad news is that Goldman thinks the risks are to the downside. Persistent inflation and thus a persistently hawkish Fed can cause a recession. Goldman economists put a 35% chance of that happening in the next 12 months. “In a recession, we predict earnings will decline and the yield gap will widen, pushing the index to the 3150 threshold,” says Kostin. markets Wall Street faces another down day, with S&P 500 futures ES00, -1.32% off 1% at 3735. The 10-year Treasury yield TMUBMUSD10Y, 3.762% rose 5.4 basis points to 3.769%. Fears of a global slowdown pushed WTI CL.1 oil futures, -3.35% down 2.1% to $81.70 a barrel. The hum The dollar index DXY, +0.82% moved above 112 for the first time in 20 years as worries about the European economy and Italian election anxiety pushed the euro EURUSD, -0.85% below 0.98 $. Economic data due on Friday includes the S&P flash US manufacturing and services PMI reports, both released at 9:45 p.m. east. The U.S. central bank is hosting its “Fed Listens” event, starting at 2 p.m. east, with opening remarks by president Jay Powell. The Early Season Grinch Award goes to Dirk Willer at Citigroup, who predicted that investors shouldn’t expect a Rally Santa this year. The UK’s new Chancellor of the Exchequer, Kwasi Kwarteng, delivered a mini-budget on Thursday. Rich in trickle down theory, he promised income and property tax cuts and put the six-month cost of energy support at 60 billion pounds ($67 billion). Perceived U.K. fiscal restraint saw gold yields TMBMKGB-10Y, 3.764% rise to a 12-year high and yet sterling GBPUSD, -1.77% hit a 37-year low. Shares of Credit Suisse CSGN, -9.83% fell more than 8% to fresh multi-year lows on reports that the beleaguered bank may need to raise further capital as it tries to restructure. The best of the web COVID-19 Scam May Surpass $45 Billion Why Trade Couldn’t Buy PeaceWhich Is Worse For You: Inflation Or Recession The chart Over the past 12 months, more than half of meeting closing bells “were accompanied by sad trombones,” says Benedek Vörös, director of index investment strategy at S&P Dow Jones Indices, in a note published Thursday morning. Under such anxiety, investing in low-volatility stocks was a better bet. “For astute factor followers, the S&P 500 Low Volatility has been something of a beacon of hope. Capturing disproportionately more upside than downside, Low Vol had a positive 12-month return of 1.2%, versus a loss of 11.6% for the S&P 500,” he notes. Source: S&P Dow Jones Indices Top tickers Here were the most active stocks on MarketWatch as of 6 a.m. east. 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