Where is the stock market going this summer?
No one really knows, but Deutsche Bank strategist David Bianco is betting the S&P 500 SPX, -0.10% is heading south.
The next move of 5% or is “more likely down than up,” Bianco and his team wrote in a note dated Friday.
“The rally so far is justified, but we think it has reached its near-term limits and is vulnerable to summer fatigue and rising anxiety over whether Congress can make pragmatic decisions,” the Deutsche Asset Management team said.
The Deutsche Bank strategists also said they are cutting back on stocks. “In accordance with the change of our S&P directional view from balanced risk to down, we tactically lower our equities allocation from 70% to 60%,” they wrote.
And they offered the five factors below that are keeping them from “chasing this rally into the summer.”
• Valuation — “We are not alarmed by current S&P valuations, but we don’t think it’s a good near term entry point either.”
• Congress – “Investors expect a corp. tax cut in autumn. Reason and self-preservation for 2018 midterms likely prevail. But some appear in love with their complex & contentious proposals.”
Source: Bloomberg Pro Terminal
Jr Trader Alexander Kumanov
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