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.

Investor’s corner

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.