With every bullish argument, there’s usually a bearish counter. Per a Bloomberg report, Goldman Sachs and Morgan Stanley are at odds on which direction the S&P 500 will take.
Fueled by a big tech comeback, the S&P 500 is up over 13% for the year, giving investors faith in a rally fueled by the expectation that inflation will dissipate and monetary policy easing will ensue.
Goldman Sachs expects the run to continue, but Morgan Stanley takes an opposite viewpoint.
“More are declaring the bear market officially over; we respectfully disagree due to our 2023 earnings forecast,” said Morgan Stanley’s Michael Wilson, noting that in the 1940s, the index rallied 24% but then subsequently hit a new low.
In the realm of behavioral finance, investor sentiment plays a pivotal role in the market, and right now, the CNN Fear and Greed Index is at 78, showing signs of “extreme greed.” Given this, it appears the overall sentiment amongst investors is similar to Morgan Stanley’s view on more bullishness ahead.
Of course, the U.S. Federal Reserve will also be a major catalyst on what the S&P 500 does, especially given that the capital markets expect a rate pause. Their comments following a rate decision could certainly trigger a sell-off that could prove Morgan Stanley’s bearish stance correct — at least in the short term.
“If the market took it as it is particularly hawkish, that would definitely be an excuse to see a bit of a sell-off here,” said Karim El Nokali, investment strategist at Schroders.
2 Options to Play the Volatility in the S&P 500
While the S&P 500 movements play out, leveraged exchange traded funds (ETFs) can allow short-term traders to play both sides while adding triple leverage to maximize gains regardless of which direction they take. Additionally, traders get built-in leverage without having to utilize a margin account.
When the S&P 500 rises, traders can play to the upside with the Direxion Daily S&P 500® Bull 3X Shares ETF (SPXL). To profit on the downside in the short term, traders can use the Direxion Daily S&P 500 Bear 3X ETF (SPXS), which seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index.
Since these funds use leverage, only seasoned traders should use them.
For more news, information, and analysis, visit the Leveraged & Inverse Channel.