Technical Analysis
We’ve had a very volatile start to 2022 when it comes to the markets. The S&P 500 closed this past Friday at a price of 4,397. That gives us a new resistance level of 4,440 and a new support level of 4,360. These numbers are from the short-term analysis. We also look at it from a long-term perspective and the 200-day moving day average for the S&P 500 is currently at a price of 4,429. The 200-day moving average is currently trading above the market at this point in time. That’s the number we’re going to focus on, along with some of the support lines moving forward.
Groundwork
Believe it or not, the Fed has kind of flown under the radar this month, which was surprising coming into the year since that was pretty much everything everyone was talking about at. With that being said, they will have meetings on Tuesday and Wednesday. We are not expecting it, but hopefully we don’t get a surprise rate hike. It’s going to be important for them to guide us into what they’re going to do for the next meeting in March. Right now, according to our CME Fed Watch Tool shown in the video for this episode, there’s basically a 90% chance of raising rates in a year with an expectation of anywhere from two to four rate hikes. It’s going to be very important for the Fed to lay the groundwork, this month, for the rest of the year.
Historical Markets
There’s no doubt that volatility has spiked in the first three trading weeks of the year. We want to remind our viewers that volatility is not a recent phenomenon. As you can see in the chart shown in the video for this episode, going back to 1980, each year the market experienced a significant correction where the S&P 500 averaged approximately a 14% intra-year pull back. Going back to 1980, even in the years with significant pullbacks like the ones we saw in 1987, 2009, and recently in 2020 with the market trading back 34% in a short period of time due to COVID, the market was able to rally back to an end of the year positive. As always, no guarantees, but history has shown that those who chose to stay the course were rewarded for their patience more often than not. We are watching the indicators carefully during this volatile time and managing assets to each client’s plan, with a diversified strategy.
Fundamental Analysis
For the last couple of years, we have had a stimulus or Fed driven market rally, as we needed to get through the recovery. Now, we need a hand off to happen because that Fed tailwind is dissipating. The Fed is meeting this week and that wasn’t even one of the top headlines as we opened our doors this morning, which is extremely surprising. With the Fed pulling back, what will lead the market higher? We think it will be the fundamentals. Adam Vansant talks about the technical analysis of the market each week, but the fundamentals, right now, are built around earnings. We are very early in the earnings reporting season, with only 64 of the 500 largest companies in the U.S. reported so far. They’re coming in a little weaker than we have seen historically with only 77% of them beating earnings expectations. That’s a really high number, but below normal. That’s the lowest number since the first quarter of 2020 and that was a pretty rough quarter. Hopefully we see a turnaround because if we see strong earnings, then the Fed becomes less and less important. Inflation can be managed by corporate balance sheets, corporations will be able to raise prices and/or wages, and we can see the market continue. We’ve got to have this nice hand off from a stimulus lead market to a more traditional, fundamentally lead market, and that starts with earnings and the earning season we’re looking at right now.
Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here
Bobby Norman, CFP®, AIF®, CEPA®
Managing Director
Wealth Consultant
Email Bobby Norman here
Trey Booth, CFA®, AIF®
Chief Investment Officer
Wealth Consultant
Email Trey Booth here
Adam Vansant, AIF®, BFA™
Vice President
Wealth Consultant
Email Adam Vansant here
Ty Miller
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
