Increased market volatility and rising yields on long-term bonds increases the risk to some of the leading sectors in S&P500, reported JPMorgan. They expect S&P to reach 2000 by year-end, representing nearly 6% drop from its current level.
That selling will not necessarily happen immediately, he said, but an initial wave of selling could snowball by breeding negative sentiment and aversion to risk. Already, investors are feeling cautious as stocks sit at lofty valuations. Positioning is pretty stretched. Technicals are exhausted. So if anything, it is best to wait for further correction.
The recent rise in long-term sovereign debt yields is also cause for concern because it stands to draw investors out of dividend-yielding stocks like telecoms and utilities, which have served as substitutes for bonds during a period of persistently low interest rates.
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