BOO YAH! Now that’s more like it! Your regularly scheduled non stop up market returned this past week with a “5 for 5” week (all 5 days up). Three of those days were >1% so it was a return of the bulls. That said to return to the “Trump market” we need to get back to almost no volatility and incremental up days of 0.3% or so 80% of the time. We noted in last week’s recap the NYSE McClellan Oscillator was still VERY oversold so a “snapback rally” was still on the docket. That was quite a snapback rally! So the “easy part” of the bounce just happened – now we will see if we are going to return to a more volatile future or go right back to the sleepy market that tacks on a little 4 out of 5 days.
For the week the S&P 500 gained 4.3% in its best week since January 2013, while the NASDAQ ended up 5.3% in its best weekly percentage gain since December 2011. Remember that strategist talking “death spiral” last week …. probably related to the people who said Brexit would mean the end of life on earth as we know it a few years ago.
“This is a year of recalibration. In January we recalibrated to higher earnings, and now we’re doing it for higher bond yields, which have been led by potentially higher inflation,” said Leo Grohowski, chief investment officer of BNY Mellon Wealth Management. “Market participants are correctly focusing on inflation, because a rise in inflation can preface an economic slowdown, or an increase in interest rates that could lead to one.”
Another stat about how ridiculous 2017 was in terms of volatility.
Less than halfway through February, the market has already matched the number of 1% moves seen over all of 2017. Last year, there were four days with a gain of 1% for the S&P (not including sessions like Aug. 22, when the index technically closed 0.99% higher), and another four where the index fell by that degree.
As was tweeted by Willie Delwiche, an investment strategist at Robert W. Baird & Co., the current number of 1% moves is “in line with median experience over the past 20 years.” In contrast, “last year was the clear exception.” According to the WSJ Market Data Group, the absolute daily percentage change for the Dow Jones Industrial Average was 0.31% in 2017. It was 0.3% for the S&P, and in both instances, that represents the smallest absolute daily percentage since 1964.