As the month of March comes to an end, and thus also the first calendar quarter of 2018, investors decided on a significant geopolitical risk, a shaky tech sector and the typical Junker before the profit.
This week Wall Street goes into a long weekend with its head high. Thursday, March 29, brought significant gains to the stock market, closing the week with the Dow 1.3% on Thursday, the S & P 1.4% and the Nasdaq 1.6%. But Thursday's gains were not compatible with a difficult month for equities.
For the 21 trading sessions in March, the Dow issued 12 reds, the S & P was 12 lower and the Nasdaq dropped in 10 sessions. March was not the only dismal patch in the first quarter of 201
After January's best monthly performance since March 2016, investors dropped their first month in February.
So much for this early optimism.
Here's a look back at the first quarter when the Dow lost 2.3%, the S & P lost 1.2% and the Nasdaq gained 2.3% on the seventh positive quarter.
Risk Concerns Mounted
"After [February selloff] investors became risk averse, it's almost as if they were over-sensitive," says Karyn Cavanaugh of Voya Investment Management. "Every little thing sends investors rushing to the exit."
For example, Wall Street this week was obsessed with the idea of a trade war. Cavanaugh explained that everyone knows that a trade war is not good – that should not shock the market. However, in this quarter, investors came in headlines that could be perceived as threatening. "They praise all the bad ones and none of the good ones," said Cavanaugh, "and I think that's a mistake."
"It was a leap of events," said CFRA chief investment strategist Sam Stovall. "A Three-T Event: Aggravation, Trade and Technology," he cites the possibility of tightening the Federal Reserve in January, trade threats in February, and the technology's sell-out in March.
The "three Ts" have triggered tremendous fluctuations in value in both the green and the red. The Dow recorded two one-day losses of 1,000 points this quarter, but also a daily gain of nearly 700 points.
In 2017, there were only eight trading days when the S & P 500 had risen or fallen more than 1% in a single session, Stovall points out. The average since the Second World War is 50 days with a 1% increase or decrease for the whole year. In 2018, there were 23 days in which the S & P 500 rose more than 1%, resulting in an annualized expectation of 88 days for the full year.
Per Cavanaugh's view, this is a symptom of trying to get ahead of the headlines. "We've seen a lot of rotation," notes Cavanaugh. "There were a lot of fights for positions."
Stovall says the S & P 500 took just 13 calendar days to move from a record high to a 10% correction this quarter, the fastest since World War II. But the market is "mature", he said, as stocks traded 564 calendar days without a 5% drop on the S & P 500, another World War II record.
Technique took a beating
Technology, usually Wallstreetauges' apple, performed uncharacteristically poor towards the end of the first quarter. Losses have their origins in a big problem, especially for technology: Facebook Inc. (FB). After the Cambridge Analytica scandal, all technology was cracked. Excluding strong gains on Thursday, the Nasdaq delivered 3.2% in March.
Over the last three months, technology has been a mishmash: Amazon.com Inc. (AMZN) shares rose 23.6%, Facebook shares surrendered 9.5%, and Apple Inc. (AAPL) rose 0.8%. The Technology Select Sector SPDR Fund (XLK) gained 2.2%.
"Investors were worried about a rip in the armor of the tech sector," says Cavanaugh. She noted that this was unnecessary as the sector's growth and earnings forecasts are among the best in the market.
Jim Cramer and the Action Alerts Plus team hold positions on Facebook, Apple and Amazon Action Alerts PLUS Charitable Trust Portfolio . Would you like to be warned before Jim Cramer buys or sells FB, AMZN and AAPL? Learn more .
& # 39; The antidote & # 39; and where you should accept it
What could stop this new analytical, paranoid investment climate?
"The hypersensitivity antidote is profit growth," explains Cavanaugh. It forecasts 17% or more Q1 earnings growth. Investors should not worry about news from Washington or elsewhere until profit growth has a significant impact, she says.
There is reasonable reason for optimism that goes beyond income. LPL Research senior market strategist Ryan Detrick said in a note on Thursday that April "has only recently showered profits." The month has brought the stock market higher in nine of the past ten years, Detrick noted.
Stovall agrees. His data show that April was traditionally the second-strongest month for equities in the last 80 years, just behind December.
LPL predicts double-digit S & P 500 returns in 2018 and "positive US economic growth and strong gains" should outweigh trade policy and medium-term electoral concerns. "
" It may not be an easy ride, as it was in 2017, "says Cavanaugh," but stocks will continue to rise, ending the year above the point where they are now. "19659002] Get The Latest News From TheStreet Get Here: