The S&P 500 fell finally by more than 5%

Current market commentary

Investor sentiment has deteriorated further. Only 28% of US private investors in the weekly AAII survey expect the US stock market to rise in the next six months. China, high energy prices and tapering concerns weigh. The S&P 500 has seen its first correction beyond 5% in 227 trading days. We see this as a healthy countermovement after the strong rally over the last few months, but still believe a correction in excess of 10% is unlikely. There is still a lot of money parked on the sidelines, and equities remain the only alternative. The positioning of hedge funds and the options markets also suggest that many investors are cautiously positioned. However, we think that the easy gains in equities are over and the coming months are likely to be characterised by increased volatility and offer only limited upside potential. There should hardly be any more valuation expansions at the index level.

Short-term outlook

In China, the National Holiday Week (Golden Week) takes place this week. The mainland stock exchanges are closed accordingly. Today OPEC+ meets and on 7 October the ECB meeting minutes are published. On 15 October, the IMF and World Bank hold their annual meeting and the G20 finance ministers meet. The latter are expected to discuss the global minimum tax again. This Tuesday, the (final) purchasing managers' indices (PMIs, Sep.) of the service sector for Europe and the US (ISM) will be published. In addition, France's industrial production data (Aug.) and Germany's new orders (Aug.) will be published one day later. Industrial production data (Aug.) for Germany will follow on Thursday. On Friday, the focus will be on US labour market data and China's services PMI (Sep.). In the following week, the German ZEW index, US consumer confidence, US retail sales and US inflation data will be published.