Global equities accelerated upward in the third quarter, and investors can be forgiven a rosy disposition: most of the would-be headwinds lining up to derail gains at the beginning of the year have dissipated. At least from a market sentiment perspective, a worrying election cycle in Europe passed largely without incident. Meanwhile, the global economic growth dynamics tangibly improved.
Caution seems warranted however, as market exuberance approaches familiarly heady levels. The pricing of risk in the bond market is at multi-decade lows. Worryingly, it had fallen to these very levels on the eve of the Great Recession. If investors are feeling as cavalier now as they did then, might they allow errors that lead to a similarly catastrophic outcome?
From a technical perspective, the long-term uptrend seems to be firmly intact. The benchmark S&P 500 index is seemingly poised to find itself higher at the end of the fourth quarter than it was at the beginning. As with the fundamental picture however, this too is not unqualified. Indeed, the chart setup is offering a glimpse of pivotal areas that in time might emerge as the place where the tide ultimately turns.
S&P 500 (weekly chart)
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