The S&P 500 Index (INDEXSP: .INX) could be on track to deliver an impressive rally over the next two months, according to experts.
After rising by around 10% since the start of the year to 2 February 2023, it then dropped over 5% to 1 March 2023.
But, experts believe that the US share market is poised to perform well in the coming months. This could be good news for the global share market and the ASX share market because of how influential investor sentiment in the US can be on the world of the world's share markets.
Why the positivity?
The Australian Financial Review quoted Stifel's chief equity strategist Barry Bannister's thoughts on the situation:
The bearish chorus of Wall Street strategists continues to fight the S&P 500 rally since the intraday low (3491.58) on October 13 with those strategists flip-flopping from calling an imminent recession (caused by the Federal Reserve) to no recession (so, the Fed must cause one).
They can call it a bear market rally, a bear trap or call it a banana…we are not ignoring potential six-month 10-15 per cent rallies.
After May this [S&P 500] rally may be mostly over.
According to the AFR's reporting, Stifel thinks that the US Federal Reserve will stop increasing interest rates in June when it hits 5.25%. This could lead to business earnings hurting in the second and the possibility of a recession increasing in September as the labour market's strength "wanes".
Another expert, Fundstrat Global's Tom Lee, thinks that the S&P 500 is going to rise for the next eight weeks.
While Lee acknowledged uncertainty after a strong performance by the S&P 500 since October 2022, he suggested that the S&P 500 could reach around 4,250 by the end of April. That would represent an increase of around 5%. Lee said:
This is a scenario that many investors are hesitant to embrace (more likely sceptical) because of the understandable lack of clarity on inflation trajectory, Fed policy path, earnings risk and general heightened concerns about recession.
And as usually is the case, when there is uncertainty, investors lean negative—meaning, the conditions confirm investors leaning bearish or outright bearish
S&P 500 snapshot
For investors wanting to own a piece of the S&P 500, there's an investment option called the iShares S&P 500 ETF (ASX: IVV). Over the past five years, it has risen by around 70%, though past performance is not a reliable indicator of future performance.
