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The fate of the bull market could become clearer in the coming days.
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BY
Sue Chang
MarketWatch
The fate of the stock market for this year may arguably hinge on how shares trade in the next few days.
According
to analysts at Bespoke Investment Group, if the market gains from April
through July, stocks almost always finish out the year higher. It’s
looking good for the S&P 500 so far.
“Now, we realize that there’s still another week left to go in July,
but barring an epic collapse in the last five trading days of the month,
this will mark the fourth straight monthly gain for the S&P 500,”
said Paul Hickey, cofounder of Bespoke, in a Tuesday note.
The
large-cap index rose 0.3% in April, 2.2% in May, 0.5% in June and is up
nearly 4% in July so far on the back of a steady economic expansion,
even as fears of an escalating trade war shadow the market. Still,
strong earnings have gone a long way in bolstering investors’ confidence
with second-quarter earnings jumping more than 20%. The mix of robust
economic data and double-digit earnings growth suggest that the odds of
the S&P 500
(SPX) retaining month-to-date gains until the closing bell on July 31 are fairly high.
Since
1928, there have been 12 years in which the market has risen from April
to July and every time, stocks have finished higher at the end of the
year, with average annual gains of 1.8%, according to Bespoke.
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| © Provided by Dow Jones & Company, Inc. |
“Now, we realize that there’s still another week left to go in July,
but barring an epic collapse in the last five trading days of the month,
this will mark the fourth straight monthly gain for the S&P 500,”
said Paul Hickey, cofounder of Bespoke, in a Tuesday note.
The
large-cap index rose 0.3% in April, 2.2% in May, 0.5% in June and is up
nearly 4% in July so far on the back of a steady economic expansion,
even as fears of an escalating trade war shadow the market. Still,
strong earnings have gone a long way in bolstering investors’ confidence
with second-quarter earnings jumping more than 20%. The mix of robust
economic data and double-digit earnings growth suggest that the odds of
the S&P 500
(SPX) retaining month-to-date gains until the closing bell on July 31 are fairly high.
Since
1928, there have been 12 years in which the market has risen from April
to July and every time, stocks have finished higher at the end of the
year, with average annual gains of 1.8%, according to Bespoke.
Meanwhile,
Ryan Detrick, senior market strategist at LPL Research, noted that the
stock market tends to follow the path of the 10-year Treasury yield
(BX:TMUBMUSD10Y)
“Two
years ago this month, the 10-yr yield bottomed at 1.36%. It is near 3%
now. In honor of that anniversary, remember that stocks tend to follow
the 10-yr higher,” he tweeted.
Since 1996, there have been 11
examples of varying stretches of time when the 10-year yield has been
higher (see the chart below). During each of those periods, the S&P
500, too, has risen, he said.
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If the S&P 500 does perform up to expectations and end July in
the green, it will not only set up the year for a strong finish but it
will also put the S&P 500 ETF
(SPY)
in position to post a new record for the longest streak to close above
its 200-day moving average. The current record stands at 525 trading
days between July 30, 1996 to Aug. 26, 1998, according to Charlie
Bilello, director of research at Pension Partners LLC.
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| © Provided by Dow Jones & Company, Inc. |
Stocks mostly rose Tuesday, with the Dow Jones Industrial Average
(DJIA) rallying by triple digits as
stellar earnings helped to boost sentiment. The S&P 500 climbed 0.5% to 2,820.40 and the Nasdaq
(COMP) fell fractionally to close at 7,840.77.
