NEW YORK (Reuters) - The S&P 500 stock index could fall another 13 percent, to 600 points, by October when the bear market is expected to end, Bank of America Merrill Lynch Research North American Economist David Rosenberg said in a note on Monday.
Stocks are currently pinned to 12-year lows as worries over the state of the economy and the health of the financial sector saw indexes break through 11-year lows hit in November, shortly after the collapse of investment bank Lehman Brothers two months earlier.
"We are now leaning toward 600 (as a bottom) on the S&P," Merrill said in a research note. Merrill had previously called the bottom at 666 points next October but have revised this estimate after the level was breached last week.
The S&P 500 <.SPX> has lost 25 percent since the start of the year after the worst January and February on record. It is down 57 percent since hitting a record 1561.8 points in October 2007.
Merrill estimates that the U.S. economy is just under half way through the current recession and that based on historical data markets recover around two-thirds of the way into a slump.
"History teaches us that bear markets end roughly 60 percent of the way into the recession." said Merrill. "Our in-house compass is now telling us that we are roughly 45 percent of the way through."
Financials, "which led the bear market by six months back in 2007, will very likely be the group that leads us out with a similar lead time."
The analysts point out that the S&P financials have just fallen to 17-year lows compared to 12-year lows across the wider market.
