The historical record for monthly price volatility since 1970 indicates that there is more whipsaw action ahead for the rest of the year. The 3 leading months for volatility are September, October, and November.
The Federal Reserve gave financial markets what was expected by lowering the target rate for the Fed Funds by 25 basis points. The Fed called the rate cut a mid-cycle adjustment and not the beginning of a new easing cycle. The markets read this as two cuts and done or maybe even one and done.
It has been an extremely bullish year in many financial categories. Today’s rising prices on government bonds may be saying something about the outlook for future nominal growth. Equity-related assets may be relying on policy to save their valuations. Precious metals could see currency devaluation ahead. The one thing they all appear to be counting on is more monetary stimulus.
Today’s more cautious investors have at last synchronized global stock exchanges around the world. This time around seems different from the same time period last year.
The S&P 500 has notably been lifted by stocks listed in Technology and Communication Services sectors. Both of these sectors combined account for over 30% of the S&P 500’s total market capitalization and are large constituents in the NASDAQ 100.
Most of the major equity markets ended the first calendar quarter of the year with double digit percentage gains. Much of last year’s losses have been put in the past. What’s more, popularly followed indexes are closing in on last year’s all-time highs. Those that abandoned stocks at the end of 2018 have surely missed out on a fast, yet sizeable market rebound.
The analysts on Wall Street set target prices for the companies that they cover. A bottom up approach that sums those target prices indicates that the index level could reach $3,062, which is a 10% premium above today’s level!
Stock markets are powerful voting machines and quickly update as new information is made available. For investors, a prudent course of action is to remain optimistic.
US stock prices sunk in what was a myriad fourth-quarter and especially dour December. From October’s peak to December’s bottom, the S&P 500’s index level had fallen almost 15%.
The exasperation in international stock markets are in lockstep with the US stock market’s pursuit to find a new bottom. As a whole, broader international stock markets are nearing correction levels this year.