It’s Still about the Fundamentals - August 8, 2018
The S&P 500 Index2 closed within 0.5% of its January 26th high on August 7.
It’s up 10.8% since the February 8th low (MarketWatch).
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.
It’s not just a few large-cap stocks that are leading the major indexes higher.
Internal measures of the market, such as advancers versus decliners, are healthy (Reformed Broker, All Star Charts, Oppenheimer & Co).
Broad market indexes that count all stocks equally vs indexes that more heavily weight the big companies (such as the S&P 500 Index) are at or near record highs (MarketWatch).
Seasonal headwinds and a pullback cannot be discounted, but the investors tuned to the fundamentals have quietly lifted stocks.