The S&P 500 index, benchmark for the US equity market, has hardly moved since the start of 2018. There have been massive climbs and great descents but the index has gained 15 points during this period. Amid two years of trade war and mixed economic data, the market hasn't budged. While S&P 500 is up 43% (including dividends) since Trump took over, the returns have gone nowhere since the end of 2017.
The Fed has done a complete 180, cutting rates twice this year after a series of hikes over the past few years. Rates, even though fuel for equity markets are a mere cloud, compared to the sky being the global trade environment, which has been anything but supportive of markets.
From this point onwards, the way I see it is that if the central banks can maintain efficacy in terms of controlling the market narrative with a balanced approach with easing, combined with decent economic performance, we might see a sustained level of S&P 500 over short term. However, if they lose control and the global recession is in play (as expected in 2020 by most economists) we can easily expect the index to fall to 2100 levels, which is about 27% drop from current levels.
Head of Investment Research