📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

They got it right first time: Deutsche Bank says S&P 500 pullback is coming

Published 06/22/2024, 10:01 AM
Updated 06/22/2024, 11:56 AM
© Reuters
US500
-

Deutsche Bank strategists suggest that the S&P 500 may be on the cusp of another pullback, following a previous successful prediction earlier in April when they anticipated a pause in the market rally.

Their forecast proved accurate as the S&P 500 saw a decline of 4.6% in the fortnight following their April 5 note.

The strategists have identified three key factors that signal a potential halt in the market's upward trajectory.

Firstly, they observed a sharp increase in equity positioning among both rules-based and discretionary funds, with exposure reaching the 95th percentile of historical readings over the past decade.

Furthermore, equity funds have recorded nine consecutive weeks of inflows, indicating a 'stretched' risk appetite in the market.

Another contributing factor is the approaching buyback blackout period, which precedes the release of second-quarter earnings.

Deutsche Bank's team estimates that companies representing nearly half of the S&P 500's market capitalization will enter blackout periods by the end of next week.

During these periods, companies are restricted from repurchasing their own shares, potentially reducing the demand for stocks and contributing to market stagnation.

With significant equity inflows and high fund exposure, combined with the upcoming blackout period, the market may indeed be due for a pause, Deutsche Bank strategists concluded.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.