Published February 9, 2018
After a 19-month melt-up, the equity market had a stunning start to the New Year. The market experienced a trifecta, beginning with the ”Santa Claus rally” during the seven-day stretch that ended Jan. 3, continuing with a rally in the first five days of 2018 and on through January, when the S&P index gained 5.62 percent.
A market axiom is that past performance is no indicator of future success. However, 29 times since 1949 all three of those events have occurred in January, and 90 percent of the time the market rose in the final 11 months of the year. The average gain was 12.9 percent.
Support for the market gains have come from a worldwide surge in growth, a weak dollar and strong earnings reports in the U.S. The U.S. manufacturing index is above 50, which signals an expanding economy. Employment numbers are growing, and wages are expected to follow. Unemployment is at historic lows, suggesting that consumer confidence will remain strong. Gross domestic product growth is expected to be around 5.6 percent – well in excess of the 2 percentish growth that we have had for years.
But wait! Didn’t the market hit a stumbling block and start February on a down note? What’s that all about? It is about the already jittery market getting jitterier.
First there was the Trump State of the Union address. As the address approached, investors began to worry about what would be in the speech. Fortunately, the speech was largely benign, and the market rallied.
But then there was the Federal Reserve meeting. The Federal Reserve was transitioning leadership from slow and steady Janet Yellen to a new person who […]