The S&P 500 is down around 18% year-to-date, on track for its worst first half of any year since 1970. The U.S. bond market is down 10.8% for the year to date.
One factor that may sustain that rally in the short term is quarter-end rebalancing, as institutional investors such as pension funds and sovereign wealth, funds draw on record cash levels to bring allocations to stocks back in line with their targets.
That phenomenon could lift markets by as much as 7% over the next week, JPM said in a note on Friday.
Several so-called contrarian indicators tracked by BoFA Global Research, including cash allocations and investor sentiment, are flashing buy signals.
Societe Generale: stocks tend to bottom once they correct the “excesses” of the previous bullish period. That would entail the S&P 500 falling another 22% to 3,020.
American Association of Individual Investors found that 59.3% believe that the U.S. stock market will be bearish over the next six months.
Source: Reuters
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