NEW YORK (Reuters) - The S&P 500 .SPX stock index rose as much as 0.57 percent on Tuesday to 2,873.23, putting it just above its previous record high of 2,872.87 on Jan. 26. Bolstered by quarterly earnings reports and a rise in stock buybacks, the benchmark S&P 500 has gained over 2 percent in the past month.
Closing above the January high would mean that the benchmark index ended a correction on Feb. 8, according to some investors.
NICHOLAS COLAS, CO-FOUNDER, DATATREK RESEARCH, NEW YORK (by email)
“It does seem like we will see new highs. Light volume periods like the last weeks of August make it easier for equities to rally just now. ETF flows have been good over the past week, especially into stocks. With lower volumes, that will tend to push stocks higher.
“As for what it means as we head into “record bull market” territory, I don think too much about it. Long term returns on US stocks have been poor for a long time. The compounded annual growth rate for the S&P over the last 20 years is 7%, far below long run averages of 10-11%. Even a record stretch of good returns doesn’t fix the damage of 2000 - 2002 (S&P down 9%, 12% and 22%) and 2008 (down 37%).”
CLIFF HODGE, DIRECTOR OF INVESTMENTS FOR CORNERSTONE WEALTH (by email)
“This rally is for real. First the Russell 2000 small-caps hit all-time highs, followed by the Nasdaq, and now we have the S&P 500 confirming the underlying strength in the markets. There is broad participation with 5 S&P 500 sectors hitting or right at new highs.
“The consumer is in great shape and there is a lot of confidence in the economy. We think trade deals which may start being announced as early as this week will power markets higher going into midterms.
“We’re also encouraged that markets have been resilient, shaking off headlines on Turkey, tariffs and trade but without a sense of euphoria which is common at the end of market cycles.”
DAVID KELLY, CHIEF GLOBAL STRATEGIST, JPMORGAN ASSET MANAGEMENT, NEW YORK,
“The short-term story about 2018 is the importance of earnings. We’ve seen in the first two quarters of this year, operating earnings per share have been up by more 25 percent year-over-year, that is truly extraordinary in the tenth year of a bull market.
“What’s happening is from time to time people get worried about other things, like trade, like tariffs, like political problems. But any point in which those tensions diminish, the strength of earnings themselves and the unattractiveness of other investment options is helping the stock market move up. Of course, the fact that other companies are redistributing a lot of money through stock buybacks, we think it will be a record year for stock buybacks, that also is contributing to a rising market.
“This is about to become the longest bull market in history. Because it’s the most hated bull market, it’s important to realize that the longevity has been helped by the fact people have been skeptical all the way along, that has prevented any particular sector of the market from getting over-valued.
“The general skepticism about the economy has kept interest rates low, it’s kept Federal Reserve policy easy. The reason this bull market has lasted so long is because nobody’s believed in it. Remarkably, even at this point – a new all-time record and on the verge of being the longest bull market in history – it’s got some room to run. This bull market will last for as long as the economy stays in expansion, and at least for the next year, the economy will continue to grow. There’s obviously some growing risk of recession in late 2019 and 2020 when fiscal stimulus fades. For now this aging bull is poised to roll forward a bit.”
CHUCK CARLSON, CHIEF EXECUTIVE OFFICER, HORIZON INVESTMENT SERVICES, HAMMOND, INDIANA
“Obviously it’s a closely watched bellwether, and any time you see a new move to new highs it matters. From our standpoint, we look at a few more things. One of them being closes more than intraday moves. It will have more resonance for us if it does close above that previous high.”
“The other thing is we also like to see confirmation from other indices, specifically the Dow Jones Industrial and the Dow Jones Transportation Average. The transportation average is also trading at a new high which is good news. The industrials, however, are still a little bit below.”
“So obviously it’s always a positive for the market when you have bellwethers breaking out to new highs, but A) we focus on closes so we’ll have to wait and see on the close, and B) we would like to see confirmation of those broad moves by other indices. We’re seeing that in the Dow Jones transportation average which is an important index to us from its economic sensitivity. But we’re still waiting for the Dow industrials to go to all-time highs.”
MIKE BAILEY, DIRECTOR OF RESEARCH, FBB CAPITAL PARTNERS, BETHESDA, MARYLAND
“We’re checking all the boxes: fundamentals, macro data, geopolitical. I think we’re lined up pretty nicely right now. We just exited a pretty good quarterly earnings season. The macro data is consistent that we’re in a nice band, avoiding overheating or underheating. The real fear factors more recently have been Turkey and the trade war. But now that major risks are off the table, when you line up all the factors, stock valuations are pretty reasonable.”
“I do wonder if we’re seeing a little bit of a FOMO (fear of missing out) rally. Maybe investors had forgotten we’re about to be in the biggest bull run ever. Perhaps some money is coming off the sidelines as more people are wanting to participate.”
MICHAEL O’ROURKE, CHIEF MARKET STRATEGIST, JONESTRADING, GREENWICH, CONNECTICUT
“Every time we make a new high, it’s considered a bullish event, but I don’t think you can make a forecast based upon that. Most people have been pretty bullish, even to the point of complacency. I don’t think that’s going to change.”
“The key thing to note is that when we hit the high in January, the rally was much more broad-based than it is today. We’re relying on fewer companies to generate additional gains. When you see a company stumble in the leadership group, like Facebook did or like Netflix did after earnings, you have to be careful.”
JIM STRUGGER, DERIVATIVES STRATEGIST, MKM PARTNERS, NEW YORK
“People (in the options market) are looking for further upside. There is no hint of concern out there. It feels like 2017 when we say that, but it’s true. You look across the major indices, in terms of ETFs and what’s trading, it just looks like upside.”
MARC POUEY, SENIOR US EQUITY STRATEGIST, BANK OF AMERICA MERRILL LYNCH, NEW YORK
“When markets hit euphoria, that typically coincides with market peaks. From all the indicators I look at we are not at euphoria. Sentiment to me means the market has further to run.”
“I think it makes sense, you’ve had 24.6 pct earnings growth and some of the headwinds that have been plaguing markets and keeping them down – mainly trade war with China – at least for now seem to ebb a little bit in the sense that there are further talks planned. So markets reaching higher is logical and makes sense.
“As with anything else there are a lot of developments and investors ought to be somewhat careful. One of the areas of concern is that there’s still a relatively narrow breadth in the market in terms of leadership. So you want to take that into account. It’s certainly positive for the Russell 2000 and the Nasdaq outperforming the S&P 500 and the Dow from a technical perspective.”
TREASURIES: The yield on the U.S. 10-year Treasury note ticked down slightly to 2.8478 but was still up on the day
DOLLAR: The U.S. dollar index was off 0.61 percent
Compiled by Alden Bentley