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  • Writer's pictureRealFacts Editorial Team

Red Flags Ignored: Piper Sandler’s 10% S&P 500 Warning

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Craig Johnson, PiperSandler’s chief market technician, said this week, “When driving a car and an Engine Warning Light pops on, most drivers, at least those older than nineteen, would safely pull over the vehicle and assess the meaning of the Warning Light(s) on the car’s dashboard or call an adult,” Amid recent market trends, Craig Johnson, Piper Sandler’s chief market technician, warns investors of a potential 10% decline in the S&P 500 this summer. Johnson compares current market warnings to a vehicle’s engine light, signaling critical alerts. Despite these signals, many investors are ignoring them due to a pervasive ’fear of missing out’ (FOMO), driving continued market participation. Johnson cautions that neglecting these warnings could lead to serious consequences, akin to ignoring a warning light until costly repairs are unavoidable.

This year’s substantial market gains, largely fueled by stellar performances from tech giants like Nvidia, heighten Johnson’s concerns. The S&P 500 and Nasdaq Composite have surged approximately 15% and 18%, respectively, with the S&P 500 recently surpassing 5,500 for the first time. However, Nvidia’s recent sharp decline from its peak raises worries that the market may have climbed too swiftly, suggesting potential volatility in the second half of 2024. Johnson predicts the S&P 500 could dip to around 4,920, aligning with the lower boundary of its upward price trend since 2022 lows.

In response to these market signals, Johnson is adjusting his investment strategy significantly. He’s increasing cash holdings to 20%, the highest since mid-2007, and reducing equity exposure to 80%. He’s also reshaping sector preferences by favoring industrial stocks and downgrading services to a neutral stance. These adjustments, though bold, reflect Johnson’s interpretation of current technical evidence. He forecasts the S&P 500 to end the year around 5,050, a 7% decline from recent levels, underscoring the importance of heeding these warning signals for prudent market navigation.


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