I have had many conversations over the course of the past couple weeks and they all have had pretty much the same common theme - "this market has felt tough". There certainly has been many news events to keep things stirred up. Namely among them, Greece, China, and the fear of rising interest rates. While these things could definitely be pointed to as reasons for this market turmoil, I want to provide you with a bit of perspective on the "tough feeling" of the stock market this year.
Through July 30th, the S&P 500 stock index is showing a positive return of about 2.4%. However, that does not tell the whole story. So far in 2015, the S&P 500 has experienced 14 moves of 2% or more. Nine of those movements have been greater than 3%. The largest rally this year was a 6.55% move off the February correction low up to a peak of 2115.48. What is really fascinating and hard to believe is that we have yet to see a 5% correction this year!
There often is a lot going on underneath the surface of the market. One way to get some perspective on the market movements this year is to look at the performance of the various sectors that make up the stock market. There are 40 sectors that I track. So far this year, the difference in performance between the best performing sector and the worst performing sector is almost 54 percentage points. The best performing sector is the Biotech Sector, which is up 22.7%. Six other sectors have managed double digit returns so far this year. On the other end of the spectrum though, 25 out of the 40 sectors are actually underperforming the S&P 500 so far this year, and 7 sectors are down double digits with Steel, Precious Metals, and Non Ferrous Metals leading the way down with losses of more than 20%. There have been plenty of positive developments within the US Equity markets so far this year. However, there have been some land mines out there as well for those not paying attention.
US Stocks continue to be ranked as the number one asset class out of the six asset classes that I evaluate on a daily basis. As a matter of fact, US stocks have been ranked number one for almost four years straight! While the financial media has proclaimed for awhile now that the stock market is due for a correction, it continues to do what it wants to do - go up! It is a lesson that is hard to learn, but it is an important one. The market will continue to do what it wants to do and not what the so-called experts think it should do. Please ignore the financial media. I do. In the meantime, I remain bullish because the indicators that I follow are based on the irrefutable law of supply and demand and not on the prognostications from the financial media. These indicators will tell me when it is no longer prudent to be bullish on the US stock market.