The best start to a year in three decades is a hard act to follow, but there are a lot of great reasons for stocks to climb to new heights before the rally comes to an end, according to a strategist at JPMorgan Chase & Co.
“Similarly, we believe the current bounce is far from done and we believe equities could potentially make new highs for the cycle before the next recession starts,” he said. “A positive January-February has historically led to a positive year 87% of the time since 1928 and an average +16.8% total return, compared to a 54% hit rate and 3.7% average return when returns were negative in January-February,” she wrote in a note to clients.
Still, real rates, typically defined as interest rates adjusted for inflation, remain supportive. None of the previous economic downturns started with real rates below 2%, he said.Meanwhile, despite concerns about slowdowns in major economies such as China and Europe, global activity momentum is expected to improve. Labor markets in key regions remain robust and a U.S. recession has never materialized when the jobless rate is falling, according to the strategist. The U.S.
And for all the market’s impressive gains year to date, stocks are still attractive from a valuation point with S&P 500 price-to-equity ratio at 16.8 times.
I welcomed the pull back. I added to my existing positions and bought a couple of new ones. Down 400 points during the day. Up 200 from there. I bought at the low and made money by the close.
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