Autumn shadows lurk for global stocks

The S&P 500 has hit 2,000, so where next?

Andrew Wilkinson, chief market analyst at Interactive Brokers, says this has brought the index close to the year-end average analyst forecast of 2,013.

The range is 1,850 to 2,300, and the bottom figure shows none expect the market to suffer a 10 per cent correction.

That would mean no such retreat in more than three years. The longer that record runs, the greater the chance of a bigger pullback.

Mr Wilkinson looks at option pricing to interpret how the market sees the probability of the extreme forecasts being hit by the end of next year. There’s a 32.3 per cent chance of the S&P falling to 1,850 and just a 10.4 per cent chance it will climb to 2,300, he says.

Meanwhile, note that by start of trading on Tuesday the S&P 500 was up nearly 3.5 per cent for August, a month that over the past 10 years has averaged a 0.5 per cent decline. This means the traditional year-end rally may have already used up plenty of juice.

Autumn also tends to be a time of more volatility, while mid-September sees a combination of the next Fed decision and the huge Alibaba IPO, which, as Bank of America Merrill Lynch says, cover three of the biggest investment themes of the past decade: liquidity, China and the internet.