Equity market direction is often dominated by a single cross market, but those relationships tend to be fleeting. Terminal rates have been the dominant cross market for the S&P 500 (SPX) since mid-April, but we now see the potential for collinearity to fade in coming
SPX support levels are in focus as the S&P 500 (SPX) faded from predetermined resistance near 4100 this week. Intraday levels have the SPX below support at ~3900.
SPX support levels are in focus as the S&P 500 (SPX) faded from predetermined resistance near 4100 this week. Intraday levels have the SPX below support at ~3900.
Today’s updated median dot for ’23 will have implications for terminal rate expectations and equity markets. Terminal rate expectations have been the single most important cross market for the S&P 500 (SPX) since mid-April.
A cooler than expected October CPI report in mid-November caused the unwinding of a crowded macro trade that was short Treasury duration and long USD.
The S&P 500 (SPX) is priced for dovish data next week, after managing to close above its 200-day moving average on Friday and generating press optimism that we could see more CTA buying activity this morning.
We expect the S&P 500 to lose steam as it approaches resistance ahead in the 4100-4200 zone. This has been our target for the Q4 rally that was signaled back in mid-October.
The CBOE Volatility Index (VIX) has returned to ‘normal’ levels near 20, which temporarily removes an equity headwind that’s been present for most of the year. This marginally improves the chances for the S&P 500 (SPX) to break above resistance in the 4100-4200 range if/when
Powell’s overall tone is more dovish than expected. Consensus was looking for his comments to be at least as hawkish as his post-meeting press conference on November 2. The most hawkish aspect of that press conference was Powell saying the cycle ceiling would need to
Given the sharp recent uptick in interest rates, it’s reasonable to expect some form of US recession next year. Over the next ~6 months, we expect continued resilience based on fading inflation, healthy balance sheets and a lack of macro imbalances offsetting tighter financial conditions.
