Fundamental reasons for the S&P 500 to decline before the end of the yearįive fundamental reasons why we are unlikely to see a repeat of the positive first half performance in the S&P 500 in the second half of the year are:ġ) When volatility drops to extremes, investors tend to overlook risks and stock markets may top out Ģ) An inverse yield curve, once it reverts, tends to lead to a recession, pushing equity markets down ģ) The raising of the US debt ceiling is going to drain liquidity Ĥ) The S&P 500 rally year-to-date is not supported by market breadth ĥ) Can over 300 institutional investors in the US be wrong? This could mean that there is a bumpy and less rosy road ahead for the S&P 500 until the end of the year. Since a July rate hike, for now at least, is still priced in and as the fundamental picture may worsen in the months to come, the odds for a prolonged rally seem to diminish, however.Īt a time when the contrarian CNN Fear & Greed Index has entered “extreme greed” in the, for western stock markets, historically unfavourable period of the year between May and October, investors seem blasé about this year’s 11% advance in the S&P 500 with volatility dropping to extremely low levels. With, according to the Chicago Mercantile Exchange (CME), the probability of no Federal Reserve (Fed) rate hike at the June meeting rising to 75%, further short-term upside may perhaps be on the cards from a fundamental point of view. In doing so, several shorts have once more been squeezed, pushing the index to its current June high at 4,299.28. The US 500 has managed to rise close to its August 2022 peak at 4,325.28 as the US government has - for the 79th time since 1960 - agreed to raise its debt ceiling. S&P 500 hits a near ten-month high as shorts once again get squeezed
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