S&P 500 Near-Term Outlook

Investing.com — The near-term outlook for the S&P 500 looks “unfavorable,” according to BTIG in a Sunday note.

The benchmark index has managed to hold onto modest gains as October nears its end. However, BTIG anticipates potential market turbulence around the upcoming US election.

> “We continue to view risk/reward as poor over the coming weeks,” Jonathan Krinsky, Chief Market Technician at BTIG said in a note.

Krinsky believes that we will either see a pre-election shakeout, or if the bulls are intent on rallying into the election, there’s a high probability for a ‘sell the news’ scenario. He states that the likelihood of a negative surprise, or 'trick,' is greater than a positive outcome, or 'treat,' in the coming weeks.

The next two weeks will be particularly eventful, featuring key earnings reports, macroeconomic data releases, the US election, and a Federal Open Market Committee (FOMC) meeting. These events are viewed as potential catalysts that could sway the market in either direction.

BTIG also noted recent movements in the bond market, particularly that 10-year Treasury yields have broken their downtrend and have been trading above their 200-day moving average (DMA) for the last few days.

Although stocks have largely ignored these movements, “another jolt higher would likely be a clear headwind,” Krinsky added.

The strategist also discussed the semiconductor and AI sectors' performance, noting that only a few companies have shown significant outperformance in recent years. He pointed out that when assessing an equal-weight index of semiconductor stocks, there has been underperformance compared to the broader market over the past three years.