A bull market climbs a wall of worry, and this market is having to deal with several things right now. Some of those things being the Ukraine war, inflation is at a 40-year high, short-term interest rates are soaring, and let’s not forget, because we’ve been dealing with it since 2020, the stubborn pandemic that just won’t go away. Another thing is that the average cost of gasoline has risen 48% from a year ago to $4.24 cents a gallon. All those things are causing a wall of worry and are things that we will continue to keep an eye on.
Broad Based Rally
Last week was the two-year anniversary of the March 2020 market lows. Things seemed awful at that time, wondering how we were going to get out of the pandemic. Day after day the market was taking a beating. Since that time, over the last two years, the S&P 500 is up 73%. This performance is in the 95th percentile of returns in a two-year span. We’ve seen growth from all over and not just in one place of the market. Tech has gained two percentage points in the S&P 500. Other areas have also grown such as discretionary, energy, and financials. There has been a broad-based rally and has been a good time to be in the market when you would have thought that all hope was lost. Indices have performed differently, but we have focused on the S&P 500.
The S&P 500 closed Friday at its highest since February 9th at a price of 4,543. This gives us a new short-term resistance level of 4,580 and a new support level of 4,500. Also, the 100-day moving average of the S&P 500 is currently at a price of 4,546 which is right in line with the close price from Friday. That’s one number we really want to pay attention to in order to see if this creates a new resistance or support level, and to see if we can stay above it. If we stay above it, we could see a more bullish tone in the market and potentially keep this rally going. If we fall below it, we could see the bears come out. This is one thing that we want to look at as we head towards the spring and summer months.
The Bond Market
The bond market has been getting a lot of publicity lately and rightfully so. The yields have been rising and the 10-year closed last week around 2.4%. While we think fixed income is great for any portfolio because it’s a great diversifier, it’s important to know, when it comes to buybacks and dividends, that the average stock in the S&P 500 is still yielding 3.5%. That is pretty good compared to the 2.4% yield of a 10-year treasury bond. In just the dividend yield alone, 30% of the index still exceeds the 10-year treasury, so there’s still income options out there in the equity market that are worth exploring.
Greg Powell, CIMA®
President and CEO
Email Greg Powell here
Adam Vansant, AIF®, BFA™
Email Adam Vansant here
Associate Vice President
Email Ty Miller here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.
Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.
Podcast: Play in new window | Download