Technically speaking, a bull market is defined as a 20% gain in a stock market index, such as the Standard & Poor's 500, from a closing low.
So are we in one? Technically, no. The S&P 500 hit a low of 3,583 on October 10, 2022. So a 20% gain would put the S&P 500 at right about 4,300. As you can see from the accompanying chart, the S&P 500 is still below that level.
The accompanying chart also shows how challenging the stock market has been since October 2022. When stock prices rally higher, those gains are often met by selling pressure. So it’s easy to understand that it has been a difficult period to remain focused as an investor.
It’s also a period that reminds us how important it is to “tune out the noise” and focus on what you can control, like your time horizon, risk tolerance, and goals. So let me know if you need help turning down the bear volume you might be hearing.
Bonds bucked the positive trend we saw in equities and were negative domestically and globally as yields continued to rise across the yield curve. The Bloomberg U.S. Aggregate Bond Index declined -1.37%, while the U.S. Corporate High Yield Index fell -0.42%. The Bloomberg Global Aggregate Bond Index fell -1.51%.
Debt Limit Debate: Debt limit negotiations are underway and financial regulators, politicians, and federal employees are having a stressful month. But what’s with this budget ceiling metric, and why is it taken so seriously? After all, Congress has never failed to raise the debt limit when called to—in fact, it’s acted 78 different times to raise, redefine, or temporarily extend the debt limit since 1960.3
Why are People so Pessimistic on Housing: High prices plus high interest rates which has led to a collapse in affordability. The mortgage payment needed to buy the median priced home for sale in the U.S. has moved up to $2,573, a new all-time high.4
Tax Revenues: U.S. Federal Tax receipts fell 6% over the last year, the largest YoY decline since June 2020 and before that May 2010. At least part of the drop was attributed to lower capital gains taxes paid in April as we went from a booming year for asset prices (2021) to the largest decline since 2008 (2022).4
Reprinted with permission from BTN. Copyright © 2023 Michael A. Higley.
Federal Reserve (Fed): The Federal Reserve System is the central banking system of the United States of America.
Retail Sales: Retail sales (also referred to as retail trade) tracks the resale of new and used goods to the general public, for personal or household consumption. This concept is based on the value of goods sold.
Building Permits: This concept tracks the number of permits that have been issued for new construction, additions to pre-existing structures or major renovations. These statistics are based on the number of construction permits approved.
Housing Starts: Housing (or building) starts track the number of new housing units (or buildings) that have been started during the reference period.
GDP: Gross domestic product (GDP) measures the final market value of all goods and services produced within a country. It is the most frequently used indicator of economic activity. The GDP by expenditure approach measures total final expenditures (at purchasers' prices), including exports less imports. This concept is adjusted for inflation.
PCE (headline and core): PCE deflators (or personal consumption expenditure deflators) track overall price changes for goods and services purchased by consumers. Deflators are calculated by dividing the appropriate nominal series by the corresponding real series and multiplying by 100.
Conference Board Leading Economic Index: Leading indicators include economic variables that tend to move before changes in the overall economy. These indicators give a sense of the future state of an economy.
S&P 500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.
NASDAQ: The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
Russell Mid-Cap: Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index.
Russell 2000: The Russell 2000 Index is comprised of the smallest 2000 companies in the Russell 3000 Index, representing approximately 8% of the Russell 3000 total market capitalization. The real-time value is calculated with a base value of 135.00 as of December 31, 1986. The end-of-day value is calculated with a base value of 100.00 as of December 29, 1978.
MSCI EAFE: The MSCI EAFE Index is a free-float weighted equity index. The index was developed with a base value of 100 as of December 31, 1969. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East.
MSCI EM: The MSCI EM (Emerging Markets) Index is a free-float weighted equity index that captures large and mid-cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.
Bloomberg Barclays U.S. Agg Bond: The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).
Bloomberg Barclays High Yield Corp: The Bloomberg Barclays U.S. Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded.
Bloomberg Barclays Global Agg: The Bloomberg Barclays Global Aggregate Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.
Bloomberg Barclays Municipal Bond Index: The Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax-exempt bond market. The index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds and prerefunded bonds.
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5/19 Market View Weekly: By the Numbers
May 25, 2023