Cantor Fitzgerald, a leading investment firm, has issued a cautious outlook on the near-term prospects of the U.S. stock market. Despite maintaining a positive long-term view, the firm has identified overbought signals in the S&P 500 index, indicating a potential short-term correction. The firm’s latest macroeconomic report suggests that while the mid-term environment for the stock market is improving, escalating trade tensions are complicating the economic landscape.
The report highlights that the intensifying trade war could exert additional pressure on economic growth and drive up inflation levels. Cantor Fitzgerald believes that investors will eventually view the current trade-related uncertainties as a “one-off” event, allowing the market to refocus on long-term growth potential. However, the firm anticipates a short-term market correction, partly due to the implementation of new tariffs set to take effect on August 1. This development could delay further interest rate cuts by the Federal Reserve.
In addition to the economic factors, Cantor Fitzgerald has identified several technical warning signals. On June 30, the Relative Strength Index (RSI) of the S&P 500 index surged above 70. Historical analysis indicates that such conditions often precede a market correction. Since 2018, there have been 22 instances where the RSI exceeded 70, resulting in at least a 4% decline in 7 of those cases, with nearly half of the instances seeing a drop of 3% or more.
The firm’s cautious stance is rooted in the belief that while the mid-term outlook for the stock market is favorable, the immediate future is fraught with uncertainties. The escalating trade tensions and the potential impact of new tariffs are key factors contributing to this outlook. Investors are advised to remain vigilant and consider the potential for short-term volatility as the market navigates these challenges.
