Markets were up again in March, extending an already historic win streak. The S&P 500 (SPX) gained over 3%, the Nasdaq-100 (NDX) added 1.2%, and the Russell 2000 (RUT) appreciated 3.4%. SPX and NDX have now closed five straight months in the green.
February is typically a weaker month for markets. Since 1928 the S&P 500 (SPX) has averaged a loss of 0.07% and closed positive just 55% of the time.
The month is often referred to as the "bear killer", as its end ushers in the beginning of the seasonally strong six months for the market (November - April)
We thought it would be prudent to watch the movement of the 10-year going forward. In August, we reviewed how the 10-year US Treasury yield had rebounded to its previous October 2022 high of around 4.3%. The October 2022 move to 4.3% coincided with the low in the US and Canadian stock markets last year.
Stock markets can have a seasonal pattern to them and the August to October period can produce some additional volatility when we look at history.
It has been quite an 18 month ride in the US and global stock markets since they started coming under selling pressure in January 2022 with the potential significant interest rate increases due to the real threat of inflation. Ultimately the US S&P 500 found a bottom in October 2022 and continued to advance to the current levels in 2023.
With the movement last week, it has been over 5 months since the top and we are just now entering bear territory. Although we do not know what the amount of the decline will ultimately be, we do believe it is prudent to recognize the risk environment that we are in.
As we head into the next US Federal Reserve meeting on May 3-4, we could ask ourselves if anything has really changed for many stock markets since the previous March meeting regarding their risk levels. US stock markets at that time were looking to break through some critical support levels. You could say, that these support levels ultimately held and we ended up with a nice short -term rally into the end of March. However, many US indexes have now reversed back down, and some risk indicators are at higher levels...
The global stock markets certainly turned a new page or chapter as we started 2022. It has been a series of lower highs and lower lows for many stock indexes with Toronto’s TSX being one notable exception. Toronto started the year around 21,000 and was as high as 21,700 in February. It ended March 9 at 21,493 – close to where it started the year. It has been a very different dynamic, in many other stock markets due to the central banks focus on higher interest rates and now with the horrific Russian invasion of Ukraine. We would just like it to go away but unfortunately it will not...
Last May, we asked if the tide was turning regarding leadership in North American stock markets. We noticed that the relative strength of the largest non-financial Companies on the Nasdaq or the NDX-100 was underperforming the S&P 500 to a level we had not seen for over 20 years.
It has certainly been a year of making new highs in the leading US S&P 500 stock index as the market continues to climb the proverbial – Wall of Worry. The S&P 500 hit the record 4,800 on December 29, 2021 which was the 70th new high for the index in 2021 according to CNBC despite ongoing fears throughout much of the year...
As the North American stock markets have made new all- time highs in the last few weeks, we once again see a reversal down in our main indicator that measures the percentage of stocks on a Point & Figure buy signal that trade on the NYSE – BPNYSE. We have seen this indicator move down quite a few times in the last 18 months or so...