Fed policy outlook shakes stock markets

The US S&P 500 fell by more than 1% in June in response to growing concerns about the Fed’s policy stance. We forecast the index to end this year at 1,600, which is close to its current level, but project that it will then climb to 1,750 by the end of 2015. Although monetary policy is set to become less accommodative and valuations and profit margins appear stretched, we expect stronger economic growth to provide support to US equity prices.