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It's too early to call a bottom for the stock market because there's more pain coming for regional banks, BlackRock strategist says

stock market investing
John W Banagan / Investing
  • The banking crisis hasn't fully played out so it's too soon to call a market bottom, a BlackRock strategist said.

  • In particular, there's "more pain" headed towards smaller banks, Gargi Chaudhuri told Bloomberg TV.

  • She added that looming regulatory changes for the banking system would likely impact stock prices.

It's too soon to call a bottom in the stock market as the chaos in the global banking sector continues to unfold, according to Gargi Chaudhuri, BlackRock's head of iShares investment strategy Americas.

In the past two weeks, markets have been hit with the failure of a slew of specialists banks such as Silicon Valley Bank and Signature Bank, whose deposits had to be fully backstopped by the government. Overseas, UBS agreed to takeover Credit Suisse amid concerns over the Swiss lender's health.

"I think this is just the beginning in terms of us beginning to figure out the broader ramifications of everything that we've learned over the last 10 days," Chaudhuri told Bloomberg Television on Monday.

There's also "more pain to be felt" for smaller banks, the strategists said, adding that this will lead to lower credit growth — and slower economic growth as well.

The increased federal intervention in the financial system to prevent more bank runs as well as the asset risks in smaller lenders once deemed not systemically important have raised expectations that oversight will get tighter.

On Monday, Chaudhuri indicated that represents another headwind for stocks.

"I still think it's too early for us to say that the bottom of the equity market is here because we're still going to get a lot more regulatory changes, especially in the banking system," she said.

Elsewhere, Morgan Stanley's investment chief Mike Wilson said the bear market in stocks is almost over, but the last phase of it will be "vicious."

The Fed's rush to provide liquidity and backstop banks does not equate to quantitative easing for the US economy, he said.

"The bottom line is that we think this is exactly how bear markets end," the chief equity strategist said in a note. "In this case, it's the fact that earnings growth expectations are much too high given the headwinds companies are facing, and the fact that the Fed is hiking rates during a period of contracting earnings."

Read the original article on Business Insider