Markets & economy
A solid showing for corporate earnings last quarter shows that the fundamental backdrop remains supportive for stocks.
A return to the inverse relationship between stocks and bonds could be a welcome development for investors.
Credit spreads can be a reliable indicator to help investors assess risk sentiment in the financial markets.
Recent stock market fluctuations remind investors about the fleeting and unpredictable nature of the market.
With slowing inflation and rising job openings, the cooling economy has analysts predicting a potential interest rate cut. Lower rates could benefit stocks and consumers, but uncertainty remains about a soft landing versus a future recession.
A shift in stock market leadership may reveal a more resilient bull market that is less dependent on the Magnificent 7.
Small caps have led the market recently, taking over from large caps. What will it take for the rally to continue?
Stocks soared relatively calmly through the first half of 2024. What will it take for the rally to continue?
As the second-quarter earnings season kicks off, investors will look for signs that earnings growth spreads to a broader range of companies.
Stocks were strong but quiet in the first half of 2024 as economic activity remained more resilient than most believed.
The stock market's run of all-time highs is good news for investors, but there's cause for concern below the surface.
Small caps may offer your long-term investor clients some potential opportunities for growth.
Get the latest on the S&P 500® Index’s record run, institutional investor optimism and growing signs the economy is slowing.
Stocks have had plenty of reasons to be volatile, but daily performance has been subdued this year.
In 2024, equity markets achieved unprecedented highs, buoyed by inflation optimism. Meanwhile, the FOMC’s decision to hold rates steady raised eyebrows.
Recent economic reports may lead investors to question the prevailing narrative of the resilient U.S. consumer.
In a bullish streak, the S&P 500® Index breaks records and nonfarm payrolls defy expectations. Plus, we dive into election year dynamics.
Consumers are in a dour mood, even as spending reports remain strong. What's behind this divide?
Long-term investors may feel skeptical about pouring savings into a frothy market.
Rising credit card delinquency rates signal increased financial stress among consumers, which could impact spending and the broader economy.
Investors have responded to recent reports of slower job growth and moderating business activity by embracing risk, resulting in higher stock markets
Explore the latest equity market trends: S&P 500® Index’s record high, increasing investor optimism, institutional demand, and the economic outlook.
Equity markets rebounded, and global optimism rose. Domestic and international markets showed resilience, with equity and bond funds inflows.
Historical data shows a correlation between long waits for Fed rate cuts and better stock market returns.
Equity markets rebounded, and global optimism rose. Domestic and international markets showed resilience, with equity and bond funds inflows.
The latest spell of stock volatility disrupted the impressive bull market run.
Months of hotter-than-expected inflation data complicates the Federal Reserve’s decision about when to begin cutting its benchmark rate.
Equity markets rebounded, and global optimism rose. Domestic and international markets showed resilience, with equity and bond funds inflows.
The biggest challenge to the dominance of the Magnificent 7 may come as investors turn their focus to earnings.
Stocks decline as interest rate uncertainty weighs. Investors grapple with shifting market dynamics amid geopolitical tensions and inflation concerns.
Equities slide, CPI surprises, and economic data slows.
Indicators such as market breadth can offer investors insight into what's happening in the stock market below the surface.
Markets retreat as S&P 500 logs worst week; strong job growth contrasts with looming inflation data.
Following a two-year run of interest rate hikes to combat rising inflation, the Fed was expected to shift towards reducing rates this year. However, the path to rate cuts is now uncertain due to the persistence of robust economic indicators. This unexpected economic strength could lead the Fed to reconsider its easing strategy, potentially maintaining the current rates for longer.
Equity markets surged in Q1, with inflation moderating and expected earnings growth.
It’s been nearly two years since the yield curve inverted, and still no recession, testing this once-reliable indicator.
Equal weighting all stocks in the S&P 500® Index doesn't necessarily eliminate sector biases.
With signals of potential interest rate cuts amidst inflation nearing the Fed's 2% inflation target, fixed income investors may find opportunities ahead.
Equity markets see a slight dip as inflation surges, signaling a bumpy road ahead for economic normalization and market stability.
As global stocks and other risk assets reach new highs, investors should plan for a possible temporary pullback.
Early signs of a cyclical recovery could complicate investor expectations for Federal Reserve rate changes.
Market bulls charge ahead as S&P 500 surges. Inflation cools, stocks thrive in relentless rally.
Federal Reserve policymakers, aiming for confidence in inflation reaching their 2% target, received unexpected news with 353,000 new jobs added in January. Despite this, interest rate cuts later this year remain a possibility, but labor market strength could make the road to rate cuts a longer one.
Earnings revisions can illuminate subtle yet impactful trends that often aren’t seen in stock market headlines.
Deeply held political beliefs can influence investor sentiment and potentially lead to emotional investment decisions.
Equity markets hold steady amid rising inflation and Fed tightening.
So far, 2024 for stocks looks like a rerun of last year, but patient investors may find opportunities in overlooked sectors.
How Earnings and Inflation Drove S&P 500® Index to Surpass 5,000
An old Wall Street adage says, "As goes January, so goes the year." That has many investors feeling good about 2024.
Job gains fuel S&P 500® rally.
How reliable is the LEI as a predictor of recessions?
The economy and equity markets thrive in Q4, while inflation remains subdued.
Consumer spending held up well throughout 2023, but that’s unlikely to continue.
S&P 500® Index closed the week at a record high despite a lackluster earnings season and rising interest rates. The Fed signaled a more hawkish stance, but investors shrugged off the rate fears.
Last week, the S&P 500® Index reached a new high, led by growth, tech, and consumer stocks.
While different factors may drive stock returns occasionally, earnings growth is most important over the long term.
The historical record offers investors reason for optimism about the year ahead.
The U.S. stock market retreated slightly after a solid end to 2023, while the economy showed signs of resilience with robust job growth and consumer spending. However, investors, economists, and strategists have mixed views on the outlook for 2024.
2024 might be the year when recession warnings are proven correct, although any recession should be short and mild.
Market reactions to shifts in monetary policy depend primarily on the reason behind the decision.
Investors may undervalue the impact of investment losses and don’t know that more significant gains are needed to recover fully.
The stock market’s rise since the last bear market low has been the slowest in nearly 75 years.
On the 15-year anniversary of the Lehman Brothers collapse, investors continue to allocate to cash, with money market funds attracting $1 trillion of inflows year to date, on pace to break the record set in 2020. It is unclear what percentage of the flows is a parking place to de-risk portfolios, and how much is an allocation decision with rates above 5%.
The 20% rally through July greatly shifted the scenario investors were pricing into shares from extreme pessimism to modest optimism. Given this shift, the burden of proof is more balanced between bulls and bears. Bulls continue to point to gradually softening inflation, the perceived end of the Fed’s rate cycle, general health of the consumer, and encouraging earnings season. Bears are increasingly focused on the perceived deterioration in credit following the US debt downgrade by Fitch and Moody’s cut to the ratings of ten banks and warnings on several others.
Are stocks poised for a year-end rally? The recent market pullback bears similarities to the 2022 bear market drawdown.
The COVID-19 pandemic has been highly disruptive for the U.S. economy with effects that could linger for years. We break down some short and long-term trends around the pandemic and inflation here.
Inflation hit 3.2% in July from 3% in June, reflecting the first increase in over a year. The economy has been less sensitive to higher interest rates, challenging the Fed’s fight against inflation.
The biggest question among investors in the year's second half is whether the idea of "immaculate disinflation" – the so-called scenario in which inflation comes down without a recession – can be achieved.
The economy grew by 4.9% in the third quarter, overcoming high interest rates, a resumption of student loan payments, and widespread recession forecasts. But other challenges persist, like the prospect of a government shutdown.
Retail sales rose in September despite high prices and borrowing costs. Still, questions remain about whether student loan repayments and global tensions will impact spending.
While acknowledging there’s been good progress made on controlling inflation, Fed Chair Powell recently said that there is more ground to cover to get it down to the 2% goal.
With lower inflation, the Federal Reserve is unlikely to hike rates again in this phase of monetary tightening. Still, inflation remains above their 2% target.
Growth stocks have outperformed in 2023 thanks to large-cap tech stocks gains, but the trend isn’t the same for small-cap stocks.
Equity markets continue to rise, with the Dow hitting a new record high. Investors buoyed by encouraging inflation data and dovish FOMC shift.
Investors can use macroeconomic and style factors to understand better what’s influencing the stock market and S&P 500 performance.
The equity markets soared to a year-high as inflation data eased fears of a hard landing, while the Fed remained hawkish despite market expectations of rate cuts.
Bulls were energized by the prospects of a “goldilocks” scenario of an improving macro backdrop with steadily easing inflationary pressure. A Wall Street Journal poll of economists has decreased the expectation for a recession over the next 12 months to 54% from 61%, the largest monthly drop in nearly three years. This sharp shift in expectations is highlighted by the estimate for second-quarter growth at 1.5%, up from 0.2% in the last survey.
The housing market adjusts to rising mortgage rates, high prices, and low inventory.
A holistic look at the latest consumer spending data offers insights into what may be in store for markets and the economy.
While a few tech names drive bullish sentiment, more stocks are helping to power more recent market gains.
While legislators deferred the latest shutdown drama for a few weeks, investors face uncertainty.
The “good news is bad news” theme in the market continues, with the Citigroup Economic Surprise Index again over 60, suggesting economic data continues to handily beat estimates. This has not supported equities, in fact, the correlation between economic beats and equities is at the most negative level on record. A wave of data is on the way, including CPI this week, an FOMC meeting next week, and earnings next month.
With money market funds yielding over 5%, many investors may see them as attractive alternatives to more volatile stocks.
Technical factors continue to be a tailwind for markets, as investor sentiment and positioning continue to shift following a difficult three-month period. Global stocks saw $40 billion of inflows in the last two weeks, the strongest pace in nearly two years, while investment-grade bonds saw their strongest inflows in nearly four months.
Bulls are focused on healthy macro data, improving seasonality, and extremely pessimistic sentiment and positioning, while bears argue that Fed policy remains uncertain, recession indicators continue to flash, and consumer data is beginning to suggest a slowdown. Earnings revisions further complicate this debate, with fourth-quarter estimates being revised lower but 2024 estimates remaining resilient. Investors have softened their reactions to data in recent weeks, with significantly less volatility.
The higher rate environment could become a headwind for stocks, as the 10-year Treasury yield approaches the highest level since 2007. The real 10-year yield (adjusted for inflation) is at the highest level since 2009, while the MOVE Index reflects greater volatility in bonds. The spread between the 10-year and 2-year yields is at the least inverted level since May, as investors increasingly bet on a soft landing or “no landing.”
Markets saw a relief rally this week, as several major headwinds from recent weeks eased. Markets entered the week severely oversold following declines in six of the previous eight weeks, with the S&P 500 more than two standard deviations below the 50-day moving average, setting the stage for a bounce. The Russell 2000® Growth Index exited oversold territory on Thursday following a 34-day stretch at one or more standard deviations below the 50-day moving average, the fourth-longest stretch in the 44-year history of the index.
For the third quarter, the S&P 500® Index returned -3%, the weakest in a year, but still has a 13% year-to-date return. The behavior of the equity market has seen a subtle shift, with greater emotion and volatility in reaction to the Fed, rates, and inflation than at any point this year, with the VIX approaching 20 last week. Sentiment has also collapsed, with the AAII Sentiment Survey showing bulls collapsing to 28% after peaking above 50 in July, while bears are at 41%, nearly doubling in two months.
In conjunction with this shift in markets, we also passed the one-year anniversary of the current bull market earlier this month. In reviewing historical stock data, the 22% return of the current bull market is the weakest 12-month return for a new bull market since 1950. In the 12 months following previous bear market lows, returns have averaged 39%.
While small-cap equities have recently underperformed compared to their large-cap counterparts, history indicates that trend may be short-lived. Small-caps have outperformed large-caps in eight of the last 10 decades. Not only that, but small-caps are also the only asset class to outperform inflation in every decade. They’re also attractively valued right now and offer unique diversification benefits. Given the uncertainty of today’s macroeconomic backdrop, it’s important for investors to take a long-term view and be cautious when reacting to short-term trends.
Elections can have an emotional impact on investors. Help them stay focused on the fundamental drivers of market performance.
As Fed officials debate an appropriate level for the neutral interest rate (R-star), investors consider what higher-for-longer interest rates could mean for the markets.
Insights on financial conditions can help investors understand the impact of Fed policy on the economy.
Market interaction is unusual, with simultaneous increases in bond yields, the dollar index, and commodity prices, pressuring earnings from multiple directions. Higher interest rates are putting pressure on equity market valuations through competition for investor assets and greater discounting of future cash flows.
Recession worries can affect investor sentiment. Here’s how to clarify what to expect from the economy in the future.
While legislators deferred the latest shutdown drama for a few months, investors face uncertainty.
S&P 500 edges higher amid mixed global markets and data. Investor sentiment and positioning improve as commodity prices and interest rates rise.
Shifts in sentiment have been a primary driver of market action this year. The CNN Fear & Greed Index combines seven technical indicators, including breadth, sentiment, and risk metrics. This index hit a low of 14 (on a scale from 0-100) last September and ended the year at 34, reflecting excessive pessimism. This saw a dramatic rebound this year, peaking at 82 in late July, before plummeting to 42 on Friday.
Recent economic data has been better than many market analysts had expected, lifting the spirits of stock investors.
August and September have historically been among the weakest months for stock returns. A near-term pullback shouldn't stress stock investors.
The bounce around Fed Chair Powell’s speech was encouraging, reflecting that the overbought conditions in play coming into August have been resolved and expectations have been reset. Perhaps more impressive than the strength in the face of Powell’s comments was the lack of volatility, with the VIX finishing below 16, reflecting a less emotional investor. Interest rate volatility is hovering at the lowest level of the year.
Risk metrics have moderated as the market has stabilized. Credit spreads across various asset classes, from commercial paper to high yield, have registered a slight increase yet remain within a reasonably modest range. Equity and bond market volatility remain elevated but sentiment indicators, including CNN Fear & Greed and Global Fear & Greed, are all up substantially this month, while the put/call ratio has moderated, and the S&P 500 bounced strongly off the 200-day moving average.
The “good news is bad news” trend resurfaced following a strong payroll report, driving rates higher and equities temporarily lower before rallying on short covering. Rising bond yields threaten to impact markets in multiple ways, including tightening consumer budgets, pressuring corporate earnings, and diverting investor assets from equities.