Globe editors have posted this research report with permission of Scotia Capital Inc. This should not be construed as an endorsement of the report's recommendations. For more on The Globe's disclaimers please read here. The following text is excerpted from the report:
Summer trading activity has been dominated by the pending shift in U.S. monetary policy and the continued increase in long-term treasury yields. We believe tapering's influence will stay in the spotlight.
The annual focus on seasonality is also sure to make headlines. September/October are the worst months of the year for the S&P 500.
Our positive equity bias is unchanged, and we plan to stay constructive on the S&P 500 as long as jobless claims keep improving. August was tough for the U.S. benchmark, but it feels premature to pound the table as challenging seasonality and Fed policy volatility lie ahead. The S&P 500 could retest its 200-day moving average (-5 per cent). A shift in regional leadership may also occur, especially amongst the developed markets group, and U.S. domestic cyclicals (financials, discretionary) could lag global cyclicals (energy, base metals, industrials) as Euro/China data momentum picks up.
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