The market's new trading range
The S&P 500 saw more volatility in the last two weeks than in the last two years. This is after a short-lived recovery from the first bout of volatility seen in late January.
At both times, the market landed at a similar price, known as technical support. It seems that investors find the market too much of a bargain to ignore at around 2,600 on the S&P. (See chart)
If the price drops below this number, it has the potential of falling further. Now may be a good time to check your investments and cut over-concentrated U.S. stocks. You can replace them with commodities, gold and oil, for example, which are now showing signs of newly forming strength. This could be part of the rising inflation that the Federal Reserve is betting on.
There are significant reasons to stay bullish in U.S. stocks. The new tax rules, initiated in January 2018, are pushing companies to repatriate earnings from offshore accounts. This will turn into higher dividends and stock-growth for investors, as companies pay off their debt. (S&P 500 companies have hit a share buyback record this year since 2012, says Investors Business Daily^1)
The souring geopolitical climate in international trade, Russian relations, and Trump affairs are also to blame for the recent market volatility. Headline news impacting markets are typically short-lived as they don’t represent corporate or economic fundamentals.
At Eureka Wealth Management, I keep my clients informed of the market trend and advise on taking action, when appropriate. Schedule your free portfolio review online at eurekawealthmanagement.com or call me at (760) 537-0791.