S&P 500 Index: Current 3100-3588 trading range to stay for a while – Morgan Stanley

Since returning in mid-August to highs last seen before the pandemic, the S&P 500 benchmark index of the broader US market has bounced between 3100 and a high of 3588 set on September 2. According to Lisa Shalett from Morgan Stanley, there are three key concerns that may keep stocks trading in a range for a while yet, giving investors time to reposition for the next phase.

See: S&P 500 Index to move back to the 200-DMA at 3125 as the correction is not over – Morgan Stanley

Key quotes

“The timing and size of CARES 2.0 fiscal stimulus is a major source of uncertainty, as the Senate focuses instead on a Supreme Court nomination. Current relief bills remain far apart, with versions from the Democratic-controlled House of Representatives proposing nearly $2 trillion in aid, while the Republican White House and Senate versions are closer to $1 trillion.”

The outcome of key Senate races could determine the size of the next stimulus bill if control of the chamber switches parties. Many Senate races remain close. Even if Democrats manage to gain the majority in the Senate, their margin will likely be slim. However, a ‘blue wave’ result – where the Democratic Party gains control of the White House and both chambers of Congress – could lead to an economic relief package approaching $3 trillion come next year.”

“Signs of another cresting wave of COVID-19 infections could also exacerbate worries. On October 15, US daily positive cases numbered more than 62,000, the worst report since July. In Europe, new cases have surged to twice their peak in April. We continue to believe that better treatment regimes, lower mortality rates and more clarity on when vaccines will become widely available will help to limit the economic impact. However, consumer sentiment and the job market could suffer.”