S&P 500 - woes continue

3 ott 2023

For investors hoping that US equities would recover their mojo once September was in the rearview mirror, October is proving a disappointment – so far.

The S&P 500 ended Monday’s session effectively unchanged. But it fell sharply soon after Tuesday’s open, yet again testing support at the bottom of the upward-sloping trend channel that has been building since the index hit a low in October last year.

The continued rally in bond yields (and concomitant fall in bonds) is unnerving many investors. In early trade, the yield on the key 10-year Treasury Note traded above 4.75%, levels not seen since October 2007. This increase in borrowing costs has got some observers concerned over how high, and fast, yields have rallied, with very little in the way of a pull-back. Some analysts are expressing worries about what this may mean for the plumbing of the US financial system, particularly if yields continue to rise.

The US dollar remains strong, with the Dollar Index back to levels last seen in November 2022, and the USDJPY briefly exceeded 150.00 – a level considered a line in the sand for the Bank of Japan when it comes to defending the yen.

Overall, there’s some nervousness about. But others may consider such bearishness an opportunity.