S&P 500, DAX 40, FTSE 100, Nikkei 225

Talking points for the fundamental forecasts for the S&P 500, DAX 40, FTSE 100 and Nikkei 225:

• Seasonality is likely to play an important role in the recent recovery of the S&P 500 and other major indices, but structural issues remain.
• A host of systemic fundamental issues are weighing on major equity markets, but the rapidly deteriorating growth outlook is a major concern
• Monetary policy should be seen as an effective and severe threat to the market with central banks committing to raise increases despite the capital market struggle

Basic Outlook for the S&P 500 Index: Bearish

After seven consecutive weeks of bearish slide, the S&P 500 has finally found some equilibrium with a comfortable rally. This might be the start of a major reversal after the longest running stumble since March 2001, but I consider it likely to be a temporary bounce. Statistically speaking, June is one of the weakest months for a calendar year’s performance, as the early onset of the summer slump significantly reduced activity levels. This is usually a positive factor, but it is not a strong advantage when the underlying background is very challenging and requires strong conviction to outpace the momentum. On the basic side, the terms are stressful. We’ve been through earnings season, and that leaves us with more and more annoying macro issues constantly. The outlook for economic activity has deteriorated sharply since the International Monetary Fund warned that the world’s largest economy would suffer alongside the rest of the world. On the growth front this week, major event risks in the ISM manufacturing and services surveys will be a strong proxy for GDP. Otherwise, the Conference Board’s Consumer Survey and May Nonfarm Employment data will reflect on the US consumer – one of the strongest forces in the global economy.

Chart of the historical average performance of the S&P 500 and VIX indexes by calendar month

The chart has been created By John Kicklighter with data from S&P

DAX40 Basic Outlook: Bearish

Although the German DAX 40 is not far from its official ‘bear market’ (defined by a 20 percent retracement from all-time highs), its advance has been lower and its recovery has been much more volatile than seen in its counterpart. American. In the overall subjects of interest, the placement of this European Standard Scale is much more problematic than the same analogue. The question is whether these issues will continue to be a focus in the coming week or will they take longer to unfold. From a growth perspective, the outlook for Europe has been one of the most fraught with groups like the International Monetary Fund highlighting exposure to energy issues related to Russia’s invasion of Ukraine as only one notable factor. Eurozone opinion polls can benefit from this topic. Perhaps most problematic is the struggle with the hardening policy of the European Central Bank. Recently the group clearly indicated that rallies are coming as Chair Lagarde said that the benchmark price is likely to return to the positive level by the end of September. With the release of Eurozone statistics and German CPI, the market may continue to build its expectations for something more in line with its US, Canadian and UK peers.

German DAX40 Chart (Daily)

The chart was created in TradingView منصة platform

FTSE 100 Basic Outlook: Neutral

When is there no news, good news? When the prevailing momentum is negative for the capital markets, as has been the case for most of 2022. Despite the regression in risk trends across the board, it should be noted that the UK FTSE 100 index has managed to strike a much larger balance than most of its indices. major counterparts. In terms of economic potential, the outlook for the UK downgraded for 2022 (by the International Monetary Fund) was almost as severe as the eurozone – dropping by 1.0 percentage point to 3.7 per cent. On top of monetary policy, the Bank of England moved early and consistently to increase the financing burden on the economy. However, the FTSE 100 did not print until a daily close in a “technical correction” – a 10 percent retracement from the cycle highs. While there will be meaningful key events over the next week, there isn’t much in the way of important system-wide updates. This breathing room combined with the extended weekend starting on Thursday may help provide some relief for this market. However, I don’t see these conditions as being particularly favorable for a real bullish backdrop.

UK FTSE 100 chart overlaid with 2-year UK government bond yield (weekly)

The chart was created in TradingView منصة platform

The Nikkei 225 Basic Outlook: Neutral

The Bank of Japan and Governor Kuroda committed extraordinary stimulus to support the Japanese economy even as other major policy groups around the world moved into clear and aggressive hawkish regimes. This doesn’t help the country much in adding to inflation pressures, but it is a boon for the Nikkei 225. The stock index has not escaped the pressure being exerted around the world as rising commodity prices tax imports and growth potential while marking the slowdown in major trading partners such as The United States and China are seriously curbing export potential. However, there are fewer actions this week that will play on this particular threat. On the Japanese agenda are some important updates including Q1 capital spending, April retail sales, industrial production and unemployment. However, it is not likely to carry the entire weight of the market in a clear movement whether it is bullish or bearish.

Japanese Nikkei 225 Chart Overlayed with 10 Year Inverted JGB Yield (Weekly)

The chart was created in TradingView منصة platform