-Accumulated policy distortion effect and P/E contraction are the 2018 equity risks we see, not EPS or GDP
-Equity Risk Premium bottomed (when the S&P 500 topped) on Jan-26th at 2,867, we’ll stick with Defensives
-Syncing global GDP isn’t worth much if global policy is not, and a “fake yield” 10Y puts P/E (not “E”) at risk
-Paradoxically, a muted Fed reaction to inflation may be bearish equity as markets see through “fake rates”
-The Fed front-loaded 20 years of stock gains into the past decade, that’s bad for passive but good for active
-Appendix: No “trade war,” 0% S&P 500 return to 2027E, Fed/fiscal surprises ahead and watch commodities
(What our “fake interest rates” worth)<https://stifel2.bluematrix.com/docs/pdf/db9d11ee-cb2f-498a-8d4f-6e39555c40b2.pdf#page=3>
Bottomline:”Years of accumulated policy distortion, a lack of Fed maneuvering room and shock waves from policy (e.g., tighter dollar liquidity) are the S&P 500 risks we see, but not EPS or GDP”…Our bullish call off the TD 13/9 Buy (MAR-27) intact, upside targets remain 2688/2695 and 2837. Support levels have continued to hold on the downside, we remain steadfast in our mantra “long until proven otherwise”. Stops ? For traders a close below 2613 followed by a lower open and lower low. Investors should be looking at 2556, 2498 and 2426 as critical support levels.