US equities have now hit 50 all-time highs in 2021, ending last week up 20% year-to-date. Economists at UBS think strong earnings and supportive policy will push the S&P 500 higher, led by cyclical sectors like energy and financials. The S&P’s rally has been underpinned by robust earnings growth with this run of strength is expected to stay continued. We expect revenues to be supported by robust consumer and business spending. Consumer balance sheets are the strongest in decades after households amassed significant savings over the last year. Meanwhile, businesses are struggling to keep up with demand, suggesting a long pipeline of investment projects and a need to rebuild inventories, both of which are supportive for the growth outlook. Top Federal Reserve officials at last week’s Jackson Hole symposium restated that policy will remain supportive, even after bond purchases are scaled back. The Fed’s gradual approach aligns with our view that policymakers are eager to avoid a repeat of the 2013 taper tantrum. Our base case is that the Fed will reduce its asset purchases, currently running at $120bn per month, by $15bn each month starting in December. 

BULLISH AND BEARISH CONDITIONS / POSSIBILITIES :

Our S&P 500 targets are 4,800 for June 2022 and 5,000 for end-2022. At a sector level we prefer financials, which should be well-supported by rising 10-year Treasury yields, and energy, which we expect to benefit from a further rise in oil prices in the second half of the year. 4487 was our previous yearly high and monthly resistance which the Indice broke above, turning the resistance into a support and now most probably heading towards 4700. We can expect a bearish correction from 4700 towards 4487 as a bearish retest to continue higher or a break out below would lead S&P500 towards 4405 - 4353.

SP500

Aug 31 2021