S&P will slip to 700 before sustained recovery kicks in

Last month I argued that the summer rally in US equities would not last. The S&P index hit its year low on July 23 at 797. It rallied to 972 on August 27. Now it’s back below 900. In August, investors had turned bullish on hopes of interest rate cuts. And they were encouraged about corporate governance: CEOs signed off accounts with few nasty surprises.

Bulls argue that continued strong productivity growth and consumer spending will prompt recovery and rising corporate earnings that will underpin equities.