• The S&P 500 could slump to 4,700, a further 7%-8% decline from Friday’s close, if President Donald Trump sticks with his tariff plans or the Federal Reserve doesn’t ease interest rates, Morgan Stanley analysts wrote.
• The S&P 500 closed at 5,074.08 Friday, down 9% on the week.
• Trump so far has shown no signs of backing down from the tariffs, while Fed officials have elected to keep their key interest rate steady.

The S&P 500 (^GSPC) could slump to 4,700, a further 7%-8% decline from Friday’s close, if President Donald Trump sticks with his tariff plans or the Federal Reserve doesn’t ease interest rates, Morgan Stanley analysts wrote.

The analysts said they had offered a 5,100-5,200 technical support level for the S&P 500 last Thursday but noted that “with the market quickly trading there on Friday and overnight futures down another 3-5% so far, our thoughts turn to the next area of support, which lies closer to the 200-week moving average, or 4700.”

SNP – Delayed Quote • USD

The index closed at 5,074.08 Friday, having suffered the seventh-worst week in the last 25 years, a decline of more than 9%. S&P futures are down 2.7% early Monday.

“Valuations also offer better support at that price so investors should be prepared for another 7-8% potential downside from Friday’s close if there is no line of sight to a less severe trade environment and the Fed remains firmly on hold,” the analysts wrote.

Michael Nagle / Bloomberg via Getty Images

Trump so far has shown no signs of backing down from the tariffs, while Fed officials have elected to keep their key interest rate steady. Fed Chair Jerome Powell said Friday that Trump’s larger-than-expected tariffs could stoke inflation and slow economic growth.

Read the original article on Investopedia