Opinion: S&P 500 Still Has Upside Potential, But Downside Hedging Is Advised Now

BlockBeats News, May 10th, iCapital's Chief Investment Strategist Sonali Basak stated in an interview with CNBC that the market still has room to rise, with the S&P 500 index expected to have a fair range of 7500 to 7800 points. However, she believes that the current stage requires enhanced downside hedging. She pointed out that corporate earnings are still growing, but there is limited room for further multiple expansions, and the market faces higher uncertainty in the second half of the year. Liquidity factors that have supported the market's rise before are weakening, including AI capital expenditures, large IPOs, government financing needs, and private credit competition, all of which could put pressure on the market.

Sonali Basak stated that the market's tolerance range for the 10-year US Treasury yield is roughly between 4% and 4.5%. However, if it rises to 4.8%, it may enter a "danger zone," at which point market volatility and drawdown risks could significantly intensify. She also mentioned that bonds and commodities in the traditional "60/40" asset allocation have not been effective in hedging risks, leading more and more investors to seek structured hedging strategies. She believes that the market is facing greater "fat-tail risks" at present, where unexpected volatility could occur in both the upward and downward directions.