Bank of America just slashed it year-end S&P 500 forecast to the lowest on Wall Street as it expects a recession this year to last through early 2023

• Bank of America revised its year-end target to 3600, a 20% drop from its previous prediction of 4500.
• After CPI data showed inflation at 9.1% in June, analysts slashed their prediction to the lowest on Wall Street.

Bank of America slashed its year-end forecast for the S&P 500 to 3600 on Thursday, marking a 20% cut from its previous prediction and the lowest target on Wall Street.

The bank revised its target down from 4500 in a note on Thursday. Earnings per share estimates were also revised to $218 from the previously predicted $221.

The change came after a scorching-hot inflation reading on Wednesday. Data from the Bureau of Labor Statistics showed that the Consumer Price Index rose 9.1% in June, for the fastest pace of inflation in 41 years. Economists at the bank also said the US would enter a recession this year.

"Our previous baseline outlook for the US economy featured a growth recession," the bank said in a note yesterday, referring to an economic downturn where output continues to grow, but below estimates. The bank said it now expects five quarters of negative growth, from the first quarter of this year, through the first quarter of 2023.

They added that the Federal Reserve will pause its rate hiking cycle in the first half of next year, and begin cutting rates by the second half and into the first half of 2024.

Though the market typically leads the economy, painfully high levels of inflation reported Wednesday suggested that the market was actually lagging behind, as it did in the recession of the early 1980s, the note said.

"Equities are not adequately discounting a recession if we are already in one," bank analysts added, suggesting more pain ahead for stocks even after the S&P 500 closed just closed out its worst first six months of the year since 1970.

The bank said that based on other bear markets, it has observed 11 "triggers" that are usually hit before the market finds a bottom.

"Typically, more than 70% of these signposts have been triggered before the market bottomed. Currently, only 18% of these signposts are triggered," the analysts wrote.