Economic Update: S&P 500

Recent price action in the stock market once again provided evidence of how the largest gains are often in close proximity to the sharpest selloffs.

For example, at one point this month the S&P 500 closed down by more than 20 percent from the high, officially putting the benchmark index in “bear market” territory. The speed of the decline in equity valuations was even more of a stand out because given the severity of the selloff during the first five months of 2022 this has been the 4th worst start to a year in history.

The only worse starts occurred in 1932 (Great Depression), 1940 (World War II), and 1970 (Vietnam War, U.S. Recession). Much of the weakness in 2022 has been concentrated in “growth” stocks, particularly tech. In fact, the decline in the NASDAQ 100 from its peak last November was at one point more than 31 percent, making it even larger than the decline seen during the 2020 pandemic crash.

Fast forward to this past week, though, and stocks surged by nearly 7 percent after reaching “extremely oversold” conditions across a variety of metrics. The big question now is what happens next. Is the bear market over? Not officially until we have rallied by at least 20 percent off of the low, but more generally it is still too early to signal the “all clear” because most of the issues weighing on stock prices this year are still with us, e.g. the trajectory of the economy, Fed policy, and the upcoming midterm elections.

On a typical retirement investing time horizon, however, these are all short-term market fluctuations that will probably look more like “noise” in the long-run. Moreover, at roughly seven weeks the S&P 500 recently experienced it longest losing streak since 2001, but following this latest bounce the S&P 500 on an annualized total return basis actually managed to climb back into positive territory last week, and the benchmark index is actually still up roughly 30 percent since Halloween of 2020.

Altogether such statistics provide yet another reason why regular investors should stay focused on the long-term, refrain from making emotion-based trading decisions, and maintain a portfolio that is appropriate for their risk tolerance, nearness to retirement, and other unique circumstances. As always, we are here to help with any questions you may have.

What To Watch This Week

Monday

  • S. Holiday: Memorial Day (Markets Closed)
  • Christopher Waller Speaks 11:00 AM ET

Tuesday

  • 2-Yr Note Settlement
  • 5-Yr Note Settlement
  • 7-Yr Note Settlement
  • 10-Yr TIPS Settlement
  • 20-Yr Bond Settlement
  • Case-Shiller Home Price Index 9:00 AM ET
  • FHFA House Price Index 9:00 AM ET
  • Chicago PMI 9:45 AM ET
  • Consumer Confidence 10:00 AM ET
  • Dallas Fed Manufacturing Survey 10:30 AM ET

Wednesday

  • MBA Mortgage Applications 7:00 AM ET
  • PMI Manufacturing Final 9:45 AM ET
  • ISM Manufacturing Index 10:00 AM ET
  • Construction Spending 10:00 AM ET
  • JOLTS 10:00 AM ET
  • John Williams Speaks 11:30 AM ET
  • James Bullard Speaks 1:00 PM ET
  • Beige Book 2:00 PM ET

Thursday

  • OPEC Meeting
  • Challenger Job-Cut Report 7:30 AM ET
  • ADP Employment Report 8:15 AM ET
  • Jobless Claims 8:30 AM ET
  • Productivity and Costs 8:30 AM ET
  • Factory Orders 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • EIA Petroleum Status Report 11:00 AM ET
  • 3-Yr Note Announcement 11:00 AM ET
  • 10-Yr Note Announcement 11:00 AM ET
  • 30-Yr Bond Announcement 11:00 AM ET
  • Lorie Logan Speaks 12:00 PM ET
  • Loretta Mester Speaks 1:00 PM ET

Friday

  • Employment Situation 8:30 AM ET
  • PMI Composite Final 9:45 AM ET
  • ISM Services Index 10:00 AM ET
  • Baker Hughes Rig Count 1:00 PM ET
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