Societe Generale said the S&P 500 is at a “critical juncture” as the debate between market breadth and market bubbles coincides.
The financial institution pointed out that in bear markets, narrow market width often occurs, when a small number of companies Inventories are concentrated, pushing the overall market into a bubble.
“However, we now believe that the path forward for the S&P 500 should be breadth rather than recession or concentrated positioning, as our cyclical indicators have continued to rise over the past five quarters and the profit cycle is broadening into the Nasdaq 100 outside of stocks.
Additionally, the financial institution highlighted some key calls from the investment community for U.S. stocks. Some of these calls are as follows:
- Société Générale said that once the Federal Reserve starts cutting interest rates, the S&P 500 Index (SP500) will take the next step up.
- The firm believes there is dispersion within large-cap technology stocks.
- The US election will trigger frequent rotational trading, and the potential policies of Trump 2.0 will benefit the breadth of trading.
- The organization believes that the market breadth of large-cap stocks will expand and tilt towards technology, finance, industrials, and hopes to avoid energy.
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