As the situation in the Middle East escalates, souring traders’ risk appetites and dragging the S&P 500 Index into a correction, many stock market optimists are scaling back their positive views on what the final months of 2023 will bring.
Oppenheimer & Co.’s analysts lowered their year-end forecast for the US equity benchmark to 4,400 from 4,900, previously the highest among forecasters tracked by Bloomberg. While they remain positive on stocks, the experts say there’s not enough time in the year for the index to reach its previously projected level as geopolitical risk and interest-rate worries afflict equities and strengthen the US dollar, particularly in the EURUSD currency pair.
Several of Wall Street top analysts ramped up their outlooks for US equities from June through September after failing to predict a big rally that shaped markets in the first part of the year. Strategists at heavyweights including Bank of America Corp., the Goldman Sachs Group Inc., and Citigroup Inc. were all among those who lifted their forecasts. Just as they got excited, the advance began to falter, and hopes of a buying frenzy in the final few months of the year started to look far-fetched.
On the other hand, ultra bears like Morgan Stanley and JPMorgan Chase & Co. are starting to look vindicated after their pessimism failed to play out for much of the year. Morgan Stanley’s Mike Wilson, who once again topped Institutional Investor’s ranking of portfolio strategists, wrote on Monday that the chances of a fourth quarter rally have “fallen considerably”.
“Narrowing breadth, cautious factor leadership, falling earnings revisions and fading consumer and business confidence tell a different story than the consensus, which sees a rally into year-end,” according to his weekly note.
With just two full trading months left of 2023, the S&P 500 is now about 5% below the average Wall Street year-end target of 4,370. That marks a big reversal from this past summer, when the US stock gauge eclipsed the consensus call by the most since September 2020.
All these estimates imply a further strengthening of the US dollar and a consequent decline in the EURUSD pair.
Overall Recommendation is to sell EURUSD with profit or loss taking after two months.
This content is for informational purposes only and is not intended to be investing advice.
