Ed Clissold, Chief US Strategist at Ned Davis Research, expects the S&P 500 to climb to 7,900-8,000 by year-end, even if markets witness a near-term pullback. According to CNBC TV18, Clissold views the current weakness as a pause within a longer-term uptrend, expecting one more Federal Reserve rate hike before the rally resumes. The strategist believes global equities are likely to see more consolidation in the third quarter as investors reassess geopolitical risks, rising crude oil prices and the prospect of tighter monetary policy after a strong second-quarter rally.
The S&P 500 first reached 7,500 on May 14 and has remained stuck around that level, continuing to cruise along its 50-day moving average. According to reports from Investing.com India, a 6.0% drop would send the index back to its 200-day moving average. This consolidation pattern mirrors similar sideways movements seen during late 2024 into early 2025 and again during late 2025 into early 2026, with both periods followed by pullbacks that attracted dip buyers. However, recent gap downs on Friday have created additional pressure, though market analysts view these as range-bound movements rather than trend-breaking events.
The S&P 500's bull market leadership has rotated from the Magnificent-7 to the Impressive 493 this year, with the Mag-7 experiencing a June swoon and recovering somewhat in July. As reported by Investing.com India, the S&P 493 collectively outperformed the S&P 500's Mag-7 so far this year. Recently, S&P 500 Value has been outperforming S&P 500 Growth, with Fabulous earnings momentum (FEMO) bolstering Growth's earnings expectations to such high levels that meeting them could read as a letdown. According to Bank of America CIO Michael Hartnett, the Roundhill Magnificent Seven ETF (NYSE:MAGS) now provides the cleanest signal for whether the broader market merely wobbles or begins to fracture, with a break below $65 threatening a wider retreat.
The rotation in market leadership shows up clearly across S&P 1500 sectors, with cheaper, more defensive corners outperforming since May 14. According to Investing.com India, the S&P 600 Health Care sector is up 18.7% and the S&P 600 Consumer Discretionary is up 14.4%. The S&P 500 itself is down just 0.6% over that span, while the Magnificent-7 is down 5.7%. Information Technology looks tired with new catalysts scarce and AI fatigue setting in. The semiconductor complex has already surrendered much of its earlier excess, with the SOX trading roughly 33% above its 200-day moving average, down sharply from 76% on June 3. This represents the largest drawdown since the March 2000 technology bubble peak.
Ed Clissold from Ned Davis Research notes that oil prices are surging due to higher prices rather than shortages, with the US 10-year Treasury yield climbing to 4.7% and September Fed rate hike probability rising to 82%. According to CNBC TV18, the strategist believes the Fed has backed itself into a corner due to repeated emphasis on inflation mandate, with US inflation remaining above target for the past five years. Clissold expects one rate hike with September looking like a strong possibility, noting that such a scenario rarely leads to severe economic downturn. The dollar index is now at 101.4, adding to market uncertainty as investors reassess geopolitical risks and monetary policy implications.
The analysts' consensus Q2 EPS growth estimate rose to 22.9% year-over-year on an apples-to-oranges basis, up 1.3% on the week, as reported by Investing.com India. On a pro forma basis, Q2 earnings growth is running at 26.0%, with Energy accounting for a large share given war impacts on energy prices. Goldman Sachs beat EPS estimates by 46% and JPMorgan beat by about 10%, while Financials drove much of last week's improvement. However, tech funds have absorbed a record $48 billion over the past three weeks, with the largest weekly outflow coming from cash at $119.6 billion.
Nasdaq breadth metrics are showing bearish alignment, with the Percentage of Stocks above the 50-day MA, 200-day MA and Bullish Percents all turning net bearish. These are fairly reliable reversal markers, suggesting an extended period of selling may be coming. However, analysts note it's hard to read too much into summer trading, with Trump's action in Iran creating background noise to the big picture. Bears may be able to push things lower, but the Spring swing lows are unlikely to get challenged and 200-day MAs are looking the most likely downside targets. According to Bank of America's analysis, the market's positioning remains stubbornly crowded despite damage in semiconductors and leveraged technology, with the BofA Bull & Bear Indicator climbing to a record 9.6, placing investor positioning deep inside "extreme" territory.
