The changing drivers of this year’s sell-off in the S&P 500

Downward revisions to expectations for earnings have taken a toll in the second half this year so far on the S&P 500, which had been under pressure in the first half from a discount-rate-driven drop in its valuation. We suspect expectations for earnings will continue to be revised down as storm clouds gather over the economy, and anticipate this will be enough to drive the index down further in the near term even though we think long-term Treasury yields have already peaked. Indeed, we doubt the S&P 500 will bottom out until around the middle of next year, once the end of a looming recession is in sight.

EM Drop-In (Thursday 3rd Nov): This 20-minute emerging markets briefing will take in our latest views on how the macroeconomic picture will inform EM financial markets, what Brazil’s election result means for the country’s economic outlook and our forecasts for Hungary’s forint and the Colombian peso. Register here.