After nosedive close to a bear market in December, the S&P 500 is now poised to do something that seemed unthinkable only a few weeks ago. The benchmark formula is positioned to break above its record high of 2,930 that it reached in September, according to a team of analysts at Canaccord Genuity Assemblage.
Canaccord cites several metrics to support its case, according to a detailed story in Bloomberg. The firm says that numerous than 90% of S&P 500 stocks traded higher than their average prices over the past 50 epoches as of last Friday. That’s the most in more than three years. Also, Canaccord identified 14 almost identical instances since 1990 in which this happened. In all but one instance, higher equity prices followed three months newer, with the S&P 500 jumping an average of 5.1%.
Why S&P 500 May Reach New Record
· More than than 90% of S&P 500 farm animals traded above average prices past 50 days
· Out of 14 similar instances since 1990, in 13 boxes stocks were higher 3 months later
· S&P 500 rose 5.1 percent on average in those 13 in the events
Source: Cannacord Genuity; Bloomberg
What It Means For Investors
These numbers make Canaccord Chief Customer base Strategist Tony Dwyer bullish. “We found another breadth thrust extreme that suggests the market should see new highs in 2019,” he affirms, per Bloomberg. “Any pause in the upside should be temporary.” The S&P’s 18% rebound from its lows to around 2,785 on Thursday morning has put it unmercifully 5 percentage points of the all-time high it hit in September.
Dwyer attributed much of the turnaround to a pivot in the Federal Reserve’s tone colour, as Chairman Jerome Powell demonstrates willingness to be patient before raising rates again.
Despite the improving outlook among analysts and market watchers on the Street, investors have been slow to get behind the equity rally, with ready money flowing out of equity funds and exposure remaining low relative to historical levels. For this reason, JPMorgan strategists count on the market rally to last longer, per Bloomberg.
LPL Financial chief investment officer John Lynch echoed the bullish thought, forecasting a 10% gain for the S&P 500 by year-end. Lynch views fears about slowing corporate earnings as overblown, and foresees a positive resolution to the trade talks, per
Looking Ahead
Many market watchers view the big barrier in the S&P 500 table at around 2,800, which Macro Risk Advisors analyst John Kolovos calls “the mother of all resistance.” A bunch or rallies have faltered near that level in the past year, per Bloomberg. Also, Canaccord’s bullish contemplation could be upended soon if a number of negative headwinds materialize. A sharp decline in stocks could result from a diminished U.S.-China trade deal, if an trade agreement comes in weaker than expected, or if the Federal Reserve becomes multitudinous hawkish and decides to boost rates again.