Wall Street Journal: History Bodes Well For Stocks the Remainder of the Year

For your weekend reading, I submit the following commentary from Friday's Wall Street Journal showing how historical trends since 1931 demonstrate that the stock market will continue to do well for the rest of this year.  With 50 mph winds in the forecast for tomorrow, let's hope we don't lose power.  If we do, there won't be any postings.  So if you miss this tomorrow or Monday, you'll know why. 


2-22-19 Marias: WSJ Histsory Bodes Well

MARKETS Happy Friday. I'm Jessica Menton, getting you caught up on markets as the week winds down.  Winning streaks for the Dow and Nasdaq are in jeopardy. Yesterday's losses threaten to snap eight straight weeks of gains for both indexes, with each down slightly for the week entering into today's session. Ahead of the bell, stock futures are rising.   Shares of Kraft Heinz tumbled more than 20% premarket. The packaged-food giant disclosed that securities regulators are investigating the company over its procurement policies, as it reported a loss in the latest quarter late Thursday. Meanwhile, the earnings calendar is thin, with Cinemark and Wayfair on tap this morning.   A batch of central-bank speakers are on the docket. Investors are looking for more insight on officials' timetable for ending the central bank's balance-sheet runoff ahead of Fed chief Jerome Powell's testimony on Capitol Hill next week.   Also, history bodes well for stocks the remainder of the year. Below, I dig into what's helped propel the S&P 500 following the fourth quarter’s brutal selloff. Markets in a Minute Overnight Developments Global stocks inched up on Friday, with most major benchmarks on course to close out the week higher amid continuing hopes for a trade deal between the U.S. and China. Read our full market wrap here This Year's Stock Rally Has the Benefit of Breadth The S&P 500’s industrial, energy and tech groups have led the way in 2019. U.S. stocks are sitting pretty, if history is any guide. The S&P 500, which has surged 11% to start 2019, is on pace for its biggest early-year advance in nearly three decades and is sitting 5.3% below September’s all-time high. That potentially bodes well for the rest of the year: The index moves in the same direction in the first two months and the remainder of the year 64% of the time, according to Dow Jones Market Data. A more flexible approach to monetary policy from the Federal Reserve, easing U.S.-China trade tensions and a better-than-feared corporate earnings season are among the factors driving this year’s rally, following the fourth quarter’s bruising selloff. In 1991, the last time the S&P 500 climbed more than 10% in January and February, it rose an additional 14% over the following 10 months, according to DJMD. And in the other five years when the index added at least 10% to start the year, it rose at least 6% from March through December three times. The two cautionary tales: 1931, in the midst of the Great Depression, and 1987, best known for Black Monday. In both cases, the S&P 500 rallied sharply at the beginning of the year before suffering a major crash. Among the risks that have given some investors pause this year are a projected slump in corporate earnings, slowing economic activity in China and Europe and the looming March 1 deadline for a trade agreement between Washington and Beijing. Other investors, though, point to signs of breadth in the recent rally as an encouraging sign. The S&P 500’s industrials sector has led the way in 2019 with a 17% gain, followed by the energy and technology groups, which have risen 14% and 12%, respectively. Another bullish sign for stocks: the NYSE advance-decline line, a popular indicator of market breadth that tracks the number of stocks rising minus the number falling each day, has hit new highs. Meanwhile, 90% of S&P 500 stocks on Thursday were trading above their 50-day moving average. The popular FAANG stocks—Facebook, Amazon.com, Apple, Netflix and Google parent Alphabet—are rising again after last year’s tumble, but only two, Netflix and Facebook, are outperforming the S&P 500. That may not be a bad thing: Some analysts are encouraged to see broader participation in the market rebound across other sectors. Do you think this rally will continue? Let the author know your thoughts at jessica.menton@wsj.com. Emailed comments may be edited before publication in future newsletters, and please make sure to include your name and location.