(Bloomberg) -- UBS AG’s top strategist for US equity derivatives said she’s expecting the S&P 500 to fall at least 10% from its peak within a month.
“I am tactically bearish for the next two months,” Rebecca Cheong wrote in a note to clients on Tuesday. “Even a slight disappointment in any of the upcoming economic releases could trigger a large unwind.”
She recommended investors buy tail hedges on ETFs to protect against losses, naming the iShares Russell 2000 ETF (IWM), Financial Select Sector SPDR Fund (XLF US), and iShares iBoxx High Yield Corporate Bond ETF (HYG) as preferred picks.
Cheong added that while her view reflects increasing pessimism on the market, it’s not a long-term call. “On no news event, moderate volume selling could continue in the market,” she added.
Read: Ned Davis Sees S&P 500 Correcting, No Bear Market: Taking Stock
US equities have been volatile in recent weeks, with traders becoming increasingly nervous about any sign that the US economy is cooling down faster than expected. The S&P 500 is down about 3% from a peak in late August.
The sense of near-term caution is shared by other strategists, like Goldman Sachs Group Inc.’s Christian Mueller-Glissmann. He said in a note dated Sept. 9 that risk-adjusted returns for equities to be lower into year-end, though it’s unlikely the S&P 500 will fall into a bear market.
“With elevated equity valuations, mixed macro momentum and rising policy uncertainty, there is the risk of more equity drawdowns, in our view,” he said.
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