Fat shaming is out of style everywhere but the stock market. Investors should ignore it there, as well.
This is all right on schedule, mind you. Seasonality suggests that stocks should be starting to rally right about now. The S&P 500’s strongest period begins on the 197th trading day of the year—Oct. 13 in 2023—and extends through year end, notes Jay Kaeppel, senior research analyst at SentimenTrader. Over that period, the S&P 500 has risen 70% of the time going back to October 1953, with an average gain of 6.8% when it has risen.
Such comparisons were enough to prompt Ed Clissold, chief U.S. strategist at Ned Davis Research, to rebut them in a note on Friday. While acknowledging the similarities—a strong start to the year, a summer peak, a nearly identical third-quarter pullback, and weakening breadth—he noted the differences, as well. The market’s rally this year was much broader, with plenty of stocks finding themselves in short-term uptrends based on 50-day moving averages.
That’s not as daunting as it seems. For one, the group is far cheaper than it was at the end of 2021, just before 2022’s big decline. The seven stocks trade for an average of 32.9 times 12-month forward earnings, down from 51.1 at the end of 2021. What’s more, the group is expected to grow earnings this year, as opposed to the beginning of 2022, when earnings were forecast to drop.
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