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the
Dow Jones Industrial Average
Big gains to start 2019 left many investors wondering if the stock market had just been set up for a downfall. The story suggests the opposite.
Two different companies took a look at the big gains in the market and came to the same conclusion: more potential could follow. Ned Davis Research, Ned Davis watched every year that the
S & P 500
He started with earnings in January, February and March, which has happened 22 times since 1930. He found that the rest of the year was 20 times higher. The average gain for these nine-month periods was 7.2%, exceeding the average of 5.8% over all periods from April to December. "I have not found the gains so impressive compared to all the historical cases of the last 90 years," Davis wrote.
It should be noted that both exceptions occurred in 1930, when the S & P 500 fell 39% from March to December and in 1987, when the index dropped 15% in the last nine months of the year. year because of black Monday. It reminds us that when markets go bad, they are really bad.
UBS strategist Keith Parker took a different approach. It has been looking at market performance since PMIs – an indicator of near-real-time economic activity – have bottomed out, which seems to have happened at the end of 2018.
MSCI World Index All Countries
is up 14% so far this year. That's about six percentage points higher than the average of previous rebounds.
Read our recent cover story: This bull market does not have an expiry date
The good news is that the MSCI ACWI has gained an average of 25% after reaching the bottom of the global PMI indexes, which means there may be more room for maneuver, Parker said. Of course, this comes with a pretty big caveat. "A sustained reversal of growth and profits is the key to a further rise," Parker said.
Stay tuned.
Write to Ben Levisohn at [email protected]
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