S&P 500 near-term risk-reward profile is ‘poor’ By Investing.com

Investing.com — The near-term outlook for the looks “unfavorable,” BTIG said in a Sunday note.

The benchmark index has managed to hold onto modest gains as October nears its end, however, BTIG anticipates potential market turbulence around the upcoming US election.

“We continue to view risk/reward as poor over the coming weeks,” Jonathan Krinsky, Chief Market Technician at BTIG said in a note.

“We believe we will either see a pre-election shakeout, or if the bulls are intent on rallying into the election, the odds for a ‘sell the news’ on the event is high, in our view.”

Put differently, Krinsky believes the likelihood of a negative market surprise, or ‘trick,’ is greater than that of a positive outcome, or ‘treat,’ in the weeks ahead.

The next two weeks will be particularly eventful, with key earnings reports, macroeconomic data releases, the US election, and a Federal Open Market Committee (FOMC) meeting on the horizon. These events are viewed as potential catalysts that could drive the market in either direction.

In its note, BTIG also highlighted the recent movements in the bond market, noting that 10-year Treasury yields have broken their downtrend and have been trading above their 200-day moving average (DMA) for the last few days.

Although stocks have largely ignored the move so far, “another jolt higher would likely be a clear headwind,” Krinsky noted.

The strategist also touched on the semiconductor and AI sectors’ performance, highlighting that only a few companies have shown significant outperformance in recent years. He points out that when considering an equal-weight index of semiconductor stocks, there has been underperformance relative to the broader market over the past three years.