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S&P 500 Forecast: Rally Selling to Persist, Rising US Rates a Concern

S&P 500 Forecast: Rally Selling to Persist, Rising US Rates a Concern

Justin McQueen,
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S&P 500 Analysis and News

  • S&P 500 | Selling Rallies to Persist
  • Rising Bond Yields Are a Concern for Equities
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Equities Forecast
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S&P 500 | Selling Rallies to Persist

Across the equity space, the bias remains to fade rallies. This month sees the beginning of the Fed’s quantitative tightening, yields are once again on the rise as the US 10YR breaks back above 3%. Meanwhile, firmer oil prices will keep central banks on track to tighten monetary policy aggressively. For me to shift away from the current rally selling bias, a pivot from the Fed would be needed. However, as inflation remains sticky, this is unlikely to take place in the near term. Therefore, downside risks are likely to persist for risk assets, including cryptocurrencies. On the technical front, resistance in the S&P 500 is situated at 4160 and 4200, which are areas I would look to fade recent gains.

S&P 500 Chart: Daily Time Frame

Source: Refinitiv

US 500 Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 9% 3% 5%
Weekly -4% -9% -7%
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Rising Bond Yields Are a Concern for Equities

As mentioned above, with the US 10YR back above 3%, this is likely to maintain pressure on risk assets, particularly rate-sensitive tech stocks. In turn, should yields test the May highs, it would be feasible to expect another return to 3800-3900 for the S&P 500. Over the past week, central banks have stepped up their aggressive stance on monetary policy, in which the BoC stated they would act more forcefully, meanwhile, the RBA delivered a larger than expected hike overnight. This week’s key events will also be critical for the near term outlook for bond yields as the ECB meeting is now a live meeting, while the latest US CPI print will garner attention.

US 10YR Yield Chart: Weekly Time Frame

Source: Refinitiv

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