S&P 500 Forecast Dims as Rising Yields Rattle Wall Street Firm

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As Wall Street’s elite firms hold fast to their optimistic year-end predictions for the S&P 500, Seaport Research Partners has revised its 2023 outlook for the large-cap benchmark, citing the pressure of escalating Treasury yields on risky assets. The research firm took a bold step on Monday, slashing its end-of-year S&P 500 index target from 4,650 to 4,500, attributing the move to a surge in financial market volatility that indicates looming liquidity concerns.

Victor Cossel, macro strategist at Seaport Research Partners, emphasized that the rising MOVE Index of U.S. Treasury Volatility and the DXY Index of relative Dollar crosses signal a risk-off backdrop due to tightening liquidity. The ICE BofA MOVE Index, a measure of fixed-income volatility, hit a peak of 130.69 on Monday, its highest level since July 10, according to FactSet data. Concurrently, the ICE U.S. Dollar Index, which gauges the greenback’s performance against a basket of rivals, leaped 0.3% to 103.57 on Tuesday afternoon, marking one of the index’s highest closes since June 12.

Seaport Research Partners Downgrades S&P 500 Year-End Target Amid Rising Volatility

Seaport Research Partners has revised its year-end price target for the S&P 500, down from 4,650 to 4,500. This adjustment comes in response to escalating volatility in financial markets that points toward increasing liquidity worries.

A Risk-Off Backdrop

Victor Cossel, the macro strategist at Seaport Research Partners, noted a simultaneous rise in the MOVE Index of U.S. Treasury Volatility and the DXY Index of relative Dollar crosses. This dual incline, according to Cossel, suggests a risk-off backdrop as liquidity tightens. The ICE BofA MOVE Index, which monitors fixed-income volatility, reached its highest level since July of last year. Meanwhile, the ICE U.S. Dollar Index jumped 0.3%, marking one of the index’s highest closes since June 12.

The Catch-Up Game

Despite the increase in bond and currency volatility measures, the CBOE Volatility Index, or VIX, remains relatively subdued. However, Cossel and his team anticipate it will eventually "catch up" with its global macro volatility counterparts. They forecast an extended tactical pullback for the S&P 500, potentially reaching the 4,200 level in the near term.

Sovereign Fiscal Concerns

Cossel highlights falling inflation break evens and rising yields as indicators of potential sovereign fiscal issues. "Further real rate tightening risks a continued equity hiccup," he warns. The yield on the 10-year Treasury was at 4.327% on Tuesday, near multi-year highs. Real interest rates, measured by the yield on 10-year Treasury inflation-protected securities, or TIPS, are at their highest level since 2009.

A Dovish Blink from the Fed?

Despite these concerns, Cossel believes the markets will eventually force the Federal Reserve to react in a dovish manner to maintain financial stability, likely in the second half of 2023. This policy intervention, he suggests, could support risk assets and lead to higher levels by year-end, resulting in a neutral, not bearish, stance on equities.


The revised year-end target for the S&P 500 from Seaport Research Partners presents a cautious outlook for the financial market. The rising volatility and liquidity concerns signal potential turbulence ahead. However, analysts like Cossel still see room for a policy intervention from the Federal Reserve that could stabilize the situation. Investors should keep a close eye on market movements and central bank policies in the coming months. The current environment underscores the importance of a balanced, diversified investment portfolio to weather potential market storms.

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