After the Rally, Stay Disciplined
In April, the S&P 500 has rallied by about 15% from its recent low and is now approaching a first tactical resistance area around 7’300 points, extending towards 7’400, which we see as a zone to reduce risk rather than increase it. Our central scenario remains positive, with a year‑end target of 7’700 points, but we expect an intermediate correction of roughly 15–20%, potentially towards 6’500, before that upside can be realised. In other words, we stay constructive on the medium‑term trend, but current levels are, in our view, more appropriate for trimming exposure than for adding to it.
The latest earnings season clearly supports the bull case, yet most of the good news is already reflected in valuations and no longer provides a fresh boost to multiples.
The main reason for this expected consolidation is the leadership change at the Federal Reserve.
In most post‑war episodes, the appointment of a new Fed Chair has been followed by a meaningful drawdown within six months, as markets “test” the new pilot through higher volatility, a more unstable yield curve and wider credit spreads.
The current context makes this pattern more likely: the April FOMC vote (8–4, the most divided since 1992, including three hawkish dissents) points to a fragmented committee, and Kevin Warsh will take office in an environment of already restrictive interest rates, explicit political pressure and an equity market that has largely priced in positive news.
In this framework, we treat the 7’300–7’400 range as a tactical distribution area, 6’500 as a reasonable corrective target, and 7’700 points as the upside objective once the Fed transition has been successfully navigated.
Several additional factors strengthen the case for an intermediate stress phase.
The Bank of Japan’s latest meeting highlighted a more divided board on the pace of monetary normalization, with three members voting for an immediate rate hike and a further move in June still possible. Japan remains the world’s largest net creditor, with around USD 3.6 trillion in foreign assets, so a pronounced appreciation of the yen could trigger capital repatriation and generate significant second‑round effects on global bond yields and equity markets.
At the same time, the broader geopolitical environment, ongoing conflict in the Middle East, tensions along key maritime routes, the war in Ukraine and continued supply‑chain fragmentation, maintains a non‑negligible energy‑shock risk, whose inflationary consequences are only partially reflected in current market pricing.
Together, these elements create a credible “wall of worry” that can catalyze the correction we anticipate, without calling into question the subsequent recovery path.
In parallel, the underlying fundamentals of many companies remain solid. The earnings season has delivered a high proportion of positive surprises, both on revenues and profits, and many large groups have confirmed or increased investment plans, particularly in artificial intelligence, semiconductors, software and cloud infrastructure. This reinforces our conviction in the segments of the technology ecosystem that supply the major platforms, rather than in broad, undifferentiated high‑beta exposure.
The investment roadmap that follows from this is straightforward. The preferred stance is to remain structurally long US equities, while actively managing risk along the 7’300 → 6’500 → 7’700 sequence. In practice, this means accepting the possibility of an intermediate drawdown, using current levels to strengthen hedging, operating with a pre‑defined plan to re‑accumulate risk on weakness, and focusing equity exposure on areas where micro fundamentals are most resilient.
On the defensive side of the portfolio, the Swiss franc continues to serve as the natural anchor currency, and gold retains its strategic role: after retesting important technical levels, the metal may consolidate for part of 2026, but the trajectory of US deficits and public debt supports its use as a long‑term anchor for purchasing‑power preservation.
