Milestones & History

By Scott Poore, AIF, AWMA, APMA
Chief Investment Officer, Eudaimonia Group

Equities close above a milestone, while some question the economy.  The S&P 500 closed above 5,000 last week, which really is nothing more than a psychological happening.  Markets often make new highs in a bull market cycle, but many are busy comparing the current market to previous peaks.  However, there are some differences between prior peaks and the current market environment.  The use of margin to purchase securities, which is considered speculative, is typically elevated in markets where "bubbles" have formed.  Currently, margin levels are average, while prior peaks have been associated with levels two times higher.  Volatility, both on the upside and downside, is lower today than in prior peaks - namely 2000 and 2007. 

More important, is when and how the Fed begins to cut interest rates.  A slow pace of rate cuts, which the current economic data supports, would be positive for equities over the next several months.  The labor market is strong, consumer spending is steady, financial conditions are favorable.  However, we have seen higher equities for 14 of the last 15 trading weeks.  A pullback in equities would be completely normal.  We typically see dips of at least 3% during a calendar year approximately 72% of the time.  Not to mention it's a presidential election year, which means we are likely to see volatility at some point.  With inflation numbers on tap this week, don't be shocked if we see some choppy trading.

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Disclosures

The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.

Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. 

Past Performance does not guarantee future results.