The S&P 500 does not want to give up. The bulls held on to control and once again advancing the S&P 500 to close on new highs. After all said and done, the index finished up .92% for the week. Large markets don’t typically turn on a dime. They typically run higher, go sideways, and finally turn down from a sideways movement. Right now, the S&P 500 and many other markets are still in the run higher stage.
When it comes to bear market territory, we are not even close. The S&P 500 and MSCI All World (ex-USA) Indexes are both greatly outpacing short-term treasuries. Some of that has to do with the recent, small decline in treasuries, but most of it is due to the advancing of the two indices. The two indices are relatively close to performance on the 12-month rolling basis, but we are focusing on international markets right now.
The health of the markets is giving us strong mixed signals. The fun and frustrating part about the stock market (or any market) is that there is always a bull and bear case. This is why it is important to have a plan PRIOR to allocating any money to risk. A plan comes from beliefs and philosophy. No matter how good your plan, if your beliefs and philosophy don’t line up with it, you will not be able to execute over time. One of our beliefs is that markets trend, so we have plans that focus on defining, identifying, and taking advantage of those trends regardless of all the noise. If I had to say one way or the other with regards to correction risk according to breadth, I’d say it is higher for a flat week than “normal.”
The week before Christmas has a few potential market moving economic numbers coming out. The first is Housing Starts and the second is US Gross Domestic Product. Last week the FOMC raised the federal funds target to the 1.25 to 1.5 percent range last week as expected. The forecasts for three more .25 percentage rate hikes in 2018 are still in place. A deviation from the expected could cause market turmoil.
The trend of the S&P 500 is up on just about all accounts. Who knows when we will have a meaningful pull back in the index, but right now the bulls are in control. Almost all stops and second purchase ranges are a meaningful distance lower. Some of the markets we like are in a position that could easily lead to new highs. All this makes for an exciting week before Christmas. Hope family and you have a Merry Christmas!
Adam Straseske, CMT
PS – If you want a free copy of our new book, “Home Run Financial Planning,” just let me know and I’ll mail a copy out to you. It is all about how to align your finances with your goals and values. Get a copy, read it, and take action to make 2018 your best financial year!