Charging past 3,300. Trade optimism and fourth-quarter earnings results continue to lift U.S. stocks. The S&P 500 Index rose 0.8% on Thursday, breaking above the 3,300 level to close at another record high. Equity markets continue to make new highs with several sectors participating. The S&P 500 is overbought from a technical analysis perspective in the near-term, but has solid support near 3,050, which is about 8% below current levels.
Small caps lead. Under the surface, we have seen leadership from small caps lately, which is a good sign as this group has many more stocks than large caps. The Russell 2000 Index of small cap stocks hasn’t made a new all-time high since August 2018, but it’s about 2% away from a record after the latest move up. Emerging markets have also taken a leadership role over the past few months. This is one group we continue to like from a technical point of view. When assets like copper and other industrial metals are strong, as they have been, this is usually a tailwind for emerging markets.
China GDP growth stabilizes. China’s gross domestic product (GDP) grew 6% year over year in the fourth quarter of 2019, the same pace as the third quarter. While an unchanged pace of growth is a mixed development, it’s an improvement from China GDP’s five straight quarters of declining growth amid trade tensions. We’re continuing to see signs of stabilization in global data, an encouraging development given the difficult 2019 many overseas economies weathered.
Stocks and election years. Many investors are eyeing the upcoming presidential election as an impending storm for the stock market. There’s a lot of uncertainty surrounding the November vote, but history shows stocks have thrived in years when a sitting president is up for re-election. We’ll dig into the data today on the LPL Research blog.
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