Technical indicators from the last four bear markets to ravage US equities suggest that a correction of at least 20 percent could be in store for the S&P 500. At this juncture, the risk of a US recession remains low, which should limit the coming bear market's severity and duration. However, we'll continue to monitor our favorite economic indicators for deterioration.
The S&P 500’s flat performance this year belies a number of major market and economic trends that investors can ride to profits. These key themes will inform our investment strategy as we continue to assemble our shopping list for a potential pullback in the stock market.
The divergence between the Bloomberg US Economic Surprise Index and the S&P 500 suggests that the risk of a short-term market correction continues to grow. Savvy investors have started to put together their shopping lists to prepare themselves for this buying opportunity.
Our annual forecasts provide a useful framework for the coming year and underpin our investment strategy. However, we don’t regard these predictions as written in stone; our outlook necessarily evolves when market and economic developments warrant a change.
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