Stock Market Second Half Outlook: The Bear Case (Patreon)

Global equities have decoupled from a worsening economic backdrop after rising about 13% in 2023.

NEGATIVE CASE

• Profit warnings and rising rates are denting optimism of a soft economic landing.
• Profit cuts are outweighing upgrades globally.
• Rising interest rates are likely to remain a key theme for the rest of the year.

There could be a nasty surprise in store for stock markets and credit markets in the second half of the year.

• One factor that could exacerbate any moves to the downside in the second half of the year is low trading volume.
• However, there are signs that the market is becoming more risk-averse, as evidenced by the drop in trading volume.
• Others are worried that the Fed's aggressive rate hikes could lead to a recession.

POSITIVE CASE

• The S&P 500 has had positive returns every single year when it has gained 10% or more in the first half.
• Some investors are concerned that the market is too concentrated in a handful of megacap tech stocks. I do not see this changing.