The S&P 500 could fall as short positions become more attractive and investors shift their focus beyond earnings season. Equity analyst Christopher Harvey said the index was “peaking out” after approaching its 4,200 target, in what he described as a “choppy and choppy” pattern. He expects the index to trade at 3,700 over the next three to six months, which would represent a 10.4% drop from Thursday’s close. Harvey said there will be drawdowns as investors shift their focus from the first-quarter earnings season to broader economic conditions. He called the macroeconomic environment “risky” because of uncertainty around the Fed over interest rates, the debt ceiling, student loan relief and the possibility of a credit crunch or recession. An improving short economy also didn’t help the index, he said. That’s because the year-to-date performance of the S&P 500 and overnight bank funding rates are creating positive spreads for bearish bets on the index, Harvey said. The overnight rate on which rebates are based has risen to around 5.1% from nearly 0.8% a year ago. “For those anticipating a stock sell-off, we advise patience,” he said in a note to clients on Friday. “Macroeconomic hangovers are likely to weigh on sentiment, while the improved risk/reward for SPX shorts suggests that stocks will eventually be heavily traded — and a correction could be in the offing.” The index is up 7.6 percent this year. It briefly gave up all of its year-to-date gains as investors sold amid the banking crisis. .SPX YTD Mt. A rise to 3,700 would mark a low for the S&P 500 not seen since last fall, though he still thinks the bear market ended in February. Harvey said there are a number of variables that could play into his admittedly bearish sentiment, including the Federal Reserve’s next move on interest rates, whether student loan forgiveness is approved or whether markets continue to climb in the face of uncertainty. AI could also help the S&P 500 avoid a slide if it prompts a productivity surge that could help cool inflation and boost the S&P 500 tech stocks, he said. Harvey said that if the market does decline as he expects in the coming months, he may consider restoring exposure to cyclical stocks. He was previously bullish on growth stocks while trying to be less cyclical going into 2023. For those interested in shorting, Harvey recommends using income to fund risk-mitigated call options as a way to reduce tail risk. — CNBC’s Michael Bloom contributed to this report.