In the Spotlight: S&P 500 Index
6 May 2021
The investment adage of “Sell in May and go away” is haunting the equity markets once again.
The S&P 500 index (SPX US) on 4th May, the second trading day of this month, fell by 0.67%, closing at 4164.7 with an intraday low of 4128.6.
Although the index recovered from the short-lived correction mainly due to US Treasury Secretary Yellen’s comments regarding inflation and rate hikes, investors have turned cautious over concerns of a potentially overheating economy as commodity prices skyrocket (The Bloomberg commodity index recently reached a 6-year high of 92.4, take a look at lumber prices too).
The current index level has priced in better than expected 1Q21 earnings among the Big Tech. SPX has been up for three consecutive months since February (Jan to Apr: +11%, April: +5.24%). Gamma exposure (GEX), which measures the sensitivity of existing option contracts to changes in the underlying price, topped out from the recent highs. The tapering of options activity is leading to a slowing down of the upward momentum for the SPX.
AAII investor sentiment-bearish indicator has been edging up, implying that retail investors are either reducing long positions or adding short positions.
S&P 500 Index Targets (Summary compiled by Bloomberg)
| 2021 Close | 2021 EPS | |
|---|---|---|
| Average | 4,130 | US$178 |
| Median | 4,150 | US$177 |
| High | 4,400 | US$202 |
| Low | 3,800 | US$156 |
| No. of replies | 22 | 22 |
S&P 500 Index Targets (Individual targets compiled by Bloomberg)
| Firm | Strategist | 2021 Close | 2021 EPS |
| Bank of America | Savita Subramanian | 3,800 | $185 |
| Bank of Montreal | Brian G. Belski | 4,200 | $175 |
| Barclays | Maneesh Deshpande | 4,000 | $173 |
| BTIG | Julian Emanuel | 4,000 | $173 |
| Cantor Fitzgerald | Eric Johnston | 4,400 | $190 |
| Citigroup | Tobias M. Levkovich | 3,800 | $173 |
| Cornerstone Macro | Michael Kantrowitz | 4,400 | $178 |
| Credit Suisse | Jonathan N. Golub | 4,300 | $185 |
| Deutsche Bank | Binky Chadha | 4,100 | $202 |
| Evercore ISI | Dennis DeBusschere | 4,110 | $176 |
| Fundstrat | Tom Lee | 4,300 | $177-$182 |
| Goldman Sachs | David J. Kostin | 4,300 | $181 |
| Jefferies | Sean Darby | 4,200 | $180 |
| JPMorgan | Dubravko Lakos-Bujas | 4,400 | $185 |
| Morgan Stanley | Mike Wilson | 3,900 | *$193 |
| Ned Davis Research | Ed Clissold | 4,050 | $165 |
| Oppenheimer | John Stoltzfus | 4,300 | $175 |
| RBC Capital Markets | Lori Calvasina | 4,100 | $177 |
| Scotiabank | Hugo Ste-Marie | 4,300 | $176 |
| Stifel Nicolaus | Barry B. Bannister | 3,800 | $156 |
| UBS | Keith Parker | 4,250 | $188 |
| Wells Fargo | Chris Harvey | 3,850 | $160 |
| * Morgan Stanley’s EPS estimate is for 2022 |
AAII US Investor Sentiment Bearish Reading
S&P 500 Index (1-Year)
