There are many reasons for investors to be worried about the stock market right now. The month of April means they just have to keep worrying.
There’s no denying that it’s been a tough week for the stock market.of
S&P500 index
down 0.7%,
Nasdaq Composite
down 0.5%,
Dow Jones Industrial Average
The index fell 2%, at one point on Thursday the worst pace of decline since March 2023.
And we can’t ignore the growing concerns that caused last week’s decline. That includes the possibility that the Fed won’t cut interest rates anytime soon, as suggested by Friday’s stronger-than-expected jobs report and could be further borne out by Wednesday’s consumer price index release. . Geopolitics is also adding to the wall of concern, with U.S. benchmark WTI crude prices rising more than 4% last week on concerns of rising tensions between Israel and Iran.
Add all this up and the S&P 500, which rose 10% in the first quarter and trades at a premium valuation, could be in for a correction. Still, traders continue to buy the dip. At 5214.04, it remains slightly above the 50-day moving average of 5080. The fact that it is still above recent trends shows that buyers are still in control of the market.
Market momentum has forced even less optimistic market watchers to take a relatively bullish stance. “There’s nothing that would make you say sell,” said Scott Kronert, a strategist at Citigroup, who has a target of 5,100 for the S&P 500.
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And once you stop and think about it, there’s a lot to like. Strong jobs numbers (the US economy added 303,000 jobs in March, the most since May 2023) likely mean the Fed will hold off on cutting interest rates for the time being. It also suggests that the economy remains strong. And as long as it continues to grow, U.S. corporate profits will continue to grow as well.
“That’s what we want. We want to see growth,” said Jay Woods, chief global strategist at Freedom Capital Markets. “Revenue growth continues. Everything is on track.”
This corresponds to the April course. Going back to 1928, the S&P 500 Index averaged 1.4% in the fourth month of that year, more than double its average gain of 0.6% in other months. According to Fairlead Strategies, the odds favor this type of rally given the way the market is heading into the year. In years when the S&P 500 index rose more than 10% in the first quarter, it rose an average of 1.5%, according to Fairlead Strategies.
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This suggests that you will have to wait for a fix. “Strength in April typically gives way to weakness in May, which is consistent with the adage ‘sell in May and walk away,'” writes Fairlead’s Katie Stockton .
And who knows? Maybe not yet.
Write destination Jacob Sonenshine jacob.sonenshine@barrons.com
