We would like to just point out the fact that so far this year, the stock market’s performance has a strikingly close resemblance to the performance it had this time last year. In both years, the SPY (S&P 500) began at 1257. Last year, the market gained 6.8% to a peak on February 18 at 1343. Bullish investor sentiment reached a peak of 51.5% during the month according to the American Association of Individual Investors (AAII). Similarly this year, the stock market has gained 6.8% YTD to close on February 15 at 1343 on the S&P 500. Bullish investor sentiment recently peaked at 51.6% during the month according to the latest data from the AAII.
In 2011, the stock market faced problems in late February due to a variety of circumstances. There was widespread social unrest in Libya and Egypt, an earthquake and devastating tsunami in Japan, political gridlock on raising the debt ceiling, and a European crisis that added to the abundance of “headline risk,” (which we spoke about in October). This led to a “risk off” scenario that resulted in drastically lower stock prices and a volatile trading range from early August to the end of the year. To sum this all up, we think it is safe to say that there still exist plenty of political, global, and natural risks apparent in today’s landscape. But much of the market behavior seems to be more influenced by political factors and unforeseen events rather than your basic macro-economic data and corporate earnings. Barring any catastrophic or too many unforeseen events, are we back to climbing a new wall of worry? We will likely know in the coming weeks.
