S&P 500 Forecast Ahead: Worst H1 Return Since 1970

[MongiIG]

S&P 500, US BOND YIELDS ANALYSIS AND TALKING POINTS

• S&P 500 Posts Worst H1 Return Since 1970, Will H2 Be Any Better?
• Markets Transitioning From Inflation Scare to Recession Risks, Good News For Bonds

The S&P 500 has posted its worst H1 return since 1970. For many investors, they will be glad to see the back of H1. The question now is whether H2 will be any better?. However, unless you are nostradamus, it is a known unknown how equity markets will perform in the next six months. What we can do is take a look at the top 10 worst H1 performances for stocks, which 2022 now slots into at number four (Figure 1.), and see how equities performed in H2. Of course, I am aware that past performance does not equal future results, but, we can take lessons from the past and use it as a loose guide.

Figure 1. Top Worst H1 Performances in the S&P 500 Since 1928

Source: Refinitiv, DailyFX

As shown in the table above, the S&P 500 has generally had a modest bounce back in Q3, averaging 7.7%, following an average H1 drawdown of over 20%. From current levels a 7% rise in the index takes us back just above 4000. Now while this is not an unreasonable target, it is important to note that this does not change my current bias, which remains to fade rallies. This bias will remain until the Fed pivots away from its aggressively hawkish stance, and while we have seen some encouraging inflation data with Core PCE edging lower again, alongside the continued softness in commodities. For now, the Fed remains laser focused on headline CPI, which remains the most important monthly economic data.

Elsewhere, we do appear to be transitioning from one regime of inflation scare to another regime of rising recession risks, which in turn is starting to see bonds finally work as an equity drawdown hedge. In turn, this makes the outlook for bonds more attractive, particularly now that we are seeing market based inflation expectations drift lower. Looking ahead, eyes will be on the ISM Manufacturing PMI survey as market participants attempt to gauge the extent of the current slowdown in activity.

Jul 1, 2022 | DailyFX
Justin McQueen, Strategist

[MongiIG]

S&P 500 and Nasdaq 100 Bludgeoned in the Second Quarter. Will This Trend Persist?

Jun 30, 2022 | DailyFX
Diego Colman, Market Analyst

US STOCKS OUTLOOK:

• S&P 500 drops 16.4% during the second quarter, heads to the third quarter in bear market territory
• The Nasdaq 100, for its part, sinks 22.5% amid broad-based tech sector weakness
• The macroeconomic environment will likely become more challenging for stocks in the near-term, preventing a meaningful and sustainable recovery

Today marked the end of the second quarter and the first half of the year. Both periods were disastrous for U.S. stocks on the back of extremely bearish sentiment and growing headwinds for the economy, including soaring inflationary pressures, rapidly slowing growth and higher borrowing costs for consumers and businesses.

When it was all said and done and after dizzying price swings, the S&P 500 plunged 16.4% in the second quarter, erasing more than $6 trillion in market capitalization. The Nasdaq 100, for its part, led the sell-off on Wall Street, plummeting 22.5% amid broad-based tech sector weakness. The following table summarizes the performance of the main U.S. equity indices.

Source: DailyFX and Bloomberg

The brutal rout came as the Federal Reserve launched one of its most aggressive hiking campaigns in recent times to tame inflation, now sitting at the highest level in more than four-decades. The forceful actions by policymakers, who waited too long to begin removing accommodation and then had to front-load interest rate increases, have tightened financial conditions considerably, fueling fears that the U.S. economy is headed for a hard landing. It is difficult to say with certainty whether the worst predictions will materialize, but the downturn narrative is growing stronger by the day.

[MongiIG]

DAX, DOW and FTSE Fall as the Quarter Looks Set to End in Turmoil

Jun 30, 2022 
Zain Vawda

• DAX 40:Sinks as Recession Fears Continue to Mount.
• FTSE 100: Declines as UK Business Confidence Hits 15-Month Low.
• DOW JONES: Falls as Growth Concerns Weigh Heavily.

Full article on DailyFX

[Kodiak]

If we could get some news about negotations and a possible ceasefire in Ukraine then i would say this is the bottom

https://edition.cnn.com/markets/fear-and-greed

"That indicator previously fell to 0 in August 2002, July 2008, September 2011, September 2015, January 2016 and March 2020, observed Hartnett. When it has previously zeroed out, except in the case of a double-dip recession such as 2002 or in the event of systemic events, as in 2008 and 2011, three-month returns have been strong, as the table below shows."

https://www.marketwatch.com/story/based-on-history-the-next-bull-market-is-just-months-away-and-could-take-the-s-p-500-to-6000-says-bofa-11655475414

Edited July 2 by Kodiak