For a few minutes, investors had permission anyway to deposit the February and March traumas in stocks. Then Washington overthrew the party and the festivities were put on hold again.
The S & P 500 has slipped virtually at its peak on January 26 at noon, as the legal entanglements of two former advisers to President Donald Trump drain the company's market of gaiety. More reversal than decline, the downwind was still a hit for bulls who have been waiting six months to call the correction.
"I do not think this will create a lot of fear that people will sell, but it will definitely force people to step back and not make a purchase," said Matt Maley, stock strategist at Miller Tabak + Co. " Fewer buyers in a rather thin market can cause another downside. "
Yet, if you're tempted to quit, there might be a reason to hold back the impulse. If history is a clue, investors have often ignored the clustering milestones and prefer to stop, because buying stock after an outbreak has proven to be a winning strategy.
Since 1927, the S & P 500 has taken another 17 years without records. After the end of the drought, inventories, except for one, increased in the next 12 months. On average, the index rose 13 percent, compared to 7.7 percent over a year.
"There is much talk about the end of the cycle and how close it is," said Andrew Hopkins, head of stock research at Wilmington Trust Co., who oversees more than $ 80 billion. "But from an economic point of view, it does not look like it looks like we're still in very good shape."
In fact, US gross domestic product expanded within the April-June period four-year fastest 24 percent profit increases. The lift is in stark contrast to the rest of the world, where the MSCI Emerging Markets Index has dropped 18 percent from its high and the Stoxx Europe 600 Index has posted its third monthly decline in four days.
Resilience has done little Bear bears say that growth is peaking and a confluence of forces – from rising interest rates to a possible global trade war – threatens to derail the economy.
While the market is near new territory, the euphoric buy propelled the stocks at one of the best launches of a year is nowhere to be found. Over the past month, investors have invested $ 15 billion in exchange-traded funds focused on US equities. Compared to $ 40 billion in January.
Instead of relentlessly chasing the winners, investors are slowly spinning money from favorite daughters such as technology giants and from latecomers such as drug producers and industrial conglomerates. The preference for security is creeping back as consumer staples and healthcare stocks lead the market in the last two months.
As a result, fewer and fewer stocks signal momentum warnings. On Monday, 67 members of the S & P 500 closed their 70-day Relative Strength Index above 70, which is one third of what was observed seven months ago.
"I would be worried if there were no worries in the market, which would mean that you would get a euphoric setback," said Malcolm Polley, President and Chief Investment Officer of Stewart Capital Advisors LLC of Indiana, Pennsylvania, 1 , 2 billion US dollars. "The fact that there is concern means that people are realistic in their assumptions," he said. "The market is always climbing a wall of worries – always."
Skepticism was the characteristic feature of this bull market. Fear has been a constant companion since the rally started in March 2009, from the European debt crisis in 2010 to the downgrading of the US sovereign rating in 2011 to the devaluation of the Chinese currency in 2015. Now fears of a rise in the US dollar Growth big.
What? has not killed this bull market, it has usually made stronger. Five 10-percent corrections later and $ 300 billion from US equity ETFs and mutual funds, the decade-long progress was exactly the # 1 title of the dot-com era.
Is it closer to the end of the cycle than to the start? Sure, no one doubts that. And there are tangible signs that stock valuations are getting longer and longer. Sure, the S & P 500 trades at 2.2x sales, which is at the peak of 2000. But look at the average price-to-value ratio for the members of the index, which hides market capitalization: twice that. In other words, the overvaluation was focused on technology giants in the years of the Internet frenzy. Right now everything is expensive.
While bulls are taking comfort in their sales and earnings forecasts over the next two years, skeptics are helping to criticize the downtrend in the growth curve. Both S & P 500 sales and earnings will increase by approximately half this year in 2020, according to Bloomberg analyst estimates.
"The growth of revenue and the economy was better. The question is, can you do it again?" Said Paul Christopher, head of global market strategy at Wells Fargo Investment Institute.
Borrowing too soon can be expensive. A study by Bank of America Corp. Market peaks since 1937 show that the fact that they were not invested in the last year of an advance meant that one-fifth of the rally's total return was lost. While each episode is different, this math roughly pays off in additional 550 points in the S & P 500 if the bull market continues for another year.
Rather than worrying about what might trigger the next drawdown, investors should focus on things that could drive the market, according to Steve Auth, Chief Investment Officer for stocks at Federated Investors Inc. Among its positive catalysts are: continued subdued inflation, a signal from the Fed to end interest rate hikes, easing trade tension, and a continued trend in better-than-expected economic and earnings data
Bears may "wait in vain" for the next sell-off, wrote Posted a note to customers this month and reiterated his call to the S & P 500 to end the year at 3,100. "Stocks no longer have excuses because they do not go up."