Given that we are in the later stages of this economic cycle, with factors such as increased trade tensions and geopolitical uncertainty at play, we do expect greater volatility may be ahead. But it’s important to remember that experiencing these ups and downs is a normal aspect of our market environment.
But should you sell in May this year? Maybe not, and here’s why: “If you subscribe to the old axiom, you should also note that the next six months (November 2018 through April 2019) have been the best performing six-month stretch of the presidential cycle.
The S&P 500 nine-quarter win streak has ended, with stocks down in a volatile first quarter. Bright spots in the quarter’s market performance included: growth, small caps, technology, consumer discretionary, and emerging markets. While risks remain, market fundamentals have not deteriorated and economic growth remains on pace.
Back to business: fundamentals to drive stock market gains in 2018. With a focus on business fundamentals and the impact of fiscal policy, the return of the business cycle means that earnings growth may have to shoulder most, if not all, of the load if stocks are going to produce attractive returns in 2018.
The steady bull market—now the second largest—continues. The Dow just had its third nine-day win streak of 2017, which hasn’t happened within a single year since 1955. Can the rally continue? While longer-term technicals do look very healthy, a closer look suggests that it has been a historically long time since even a modest correction, thus increasing the chances of a rise in volatility soon.
As investors increasingly trust that the economy can stand on its own without the need of monetary policy support, business fundamentals should take over as the primary market driver.
Thursday, May 25 was the 100th trading session of the year for the S&P 500 Index. Much like the first 100 days of a new presidency, this is a nice time to reflect on what has happened, what hasn’t happened, and what could happen next.
Checking in on some “Trump trades.” The election outcome and resulting expectations for fiscal policy have caused several shifts in market leadership toward areas most sensitive to these policies. Policy is not the only factor to consider when evaluating these investments, but it is a very important one.
Earnings are the key to 2017 stock market outlook. S&P 500 earnings passed an important milestone in 2016, returning to growth in the third quarter after mildly contracting for several quarters during an extended mid-cycle earnings recession.
In 2016, the U.S. economy navigated some difficult challenges including low oil prices, a strong dollar, tightening financial conditions, and the threat of deflation.