Linda S. Parenti, CFA
President & Chief Investment Strategist
On March 9th we crossed the nine-year anniversary of the current bull market. Yet, it is still only the second longest bull market in history. It may be surprising to learn that the longest ran for over twelve years, from December 1987 to March 2000. During this nine-year bull run, the S&P 500 has endured five corrections of at least 10%, but less than the 20% which defines the start of a bear market. Since the most recent correction on February 8th, the stock market has regained some ground. As of Friday, the total return of the S&P 500 was up 3.4% year-to-date.
However, the markets have also resumed the more typical pattern of positive and negative daily trading sessions, in part reflecting numerous uncertainties. Market participants seem unsure about the impact of new tariffs on economic growth, the influence of new appointments in the White House, global central bank timelines for changes in monetary policy, potentially higher than expected inflation, and the speed by which the Federal Reserve will raise interest rates this year. As views change, so then do earnings and economic growth estimates, which in turn move asset prices. There are always unknowns in investing and when speculations build, it becomes even more important to differentiate the “what-ifs” from the actual data.
On that note, the current readings continue to be encouraging. Earnings and sales growth for the fourth quarter were outstanding. Earnings estimates for upcoming quarters are rising. February’s jobs report showed a much larger than expected jump in employment, but without the feared inflationary wage growth pressure. Thanks to job growth, consumer confidence is high. Furthermore, increasing wages have improved the consumer’s ability to spend. Household debt as a percentage of disposable income remains well below the levels leading up to and during the recession. Business owners are also optimistic. The National Federation of Independent Business (NFIB) sentiment survey reached the highest level in thirty-four years in February. Evidence of business enthusiasm can be seen in the expanding capital expenditure figures coming from corporate America.
Monthly economic statistics are seldom uniformly positive across the board, and last month was no exception. We will continue to weigh the optimistic trends versus disappointments, as well as be mindful of how the above-mentioned uncertainties play out. However, the overall scenario at present is still supportive of continued economic growth and favorable toward equities.
RISKS AND IMPORTANT CONSIDERATIONS
Views and opinions expressed here are for informational and educational purposes only and may change at any time based on market or other conditions or may not come to pass. This material is not a solicitation to buy or sell securities and should not be considered specific legal, investment, or tax advice. The information provided does not consider the objectives, financial situation, or particular needs of any specific individual. All investments carry a degree of risk and there is no certainty that an investment will provide positive performance over any stated period. Equity investments are subject to company specific and market risks. Equities may decline in response to adverse company news, industry developments, or economic data. Fixed income securities are subject to market, credit, and interest rate risks. As interest rates rise, bond prices may fall. Past performance is no guarantee of future results.