Resilience – it’s one way to broadly describe market action this year. Sure, we get volatility, but the general direction of the market has been to the upside.
Why has that been the case? It’s not been a straight line higher. It rarely is. But the fundamentals are playing a big role.
The S&P 500 Index2 closed within 0.5% of its January 26th high on August 7.
There is no shortage of gloomy headlines that can distract investors, but favorable fundamentals have supported stocks.
The economy is expanding at a robust pace.
Driven by economic growth and the cut in the corporate tax rate, profit growth has been exceptionally strong.
Interest rates aren’t far from historic lows.
Companies are expected to repurchase a record number of shares in 2018 (S&P Dow Jones Indices).
All create tailwinds for shares.
The second quarter GDP report included revisions in the data going all the way back to 1929. Included in the U.S. BEA’s report is consumer spending and personal income. The income component isn’t a part of GDP, but it was also subject to revisions.
The U.S. economy just recorded its best quarter in nearly four years. Gross Domestic Product (GDP), which is the broadest measure of the value of a country’s economy, grew at an annual pace of 4.1%, according to the U.S. Bureau of Economic Analysis – see Figure 1.
We’ll get two more revisions over the next couple of months, but the early read is encouraging.