2 Year Chart of the BPNDX. How similar is today's market to early 2001? We won't know for a while but as January goes does not always work for the entirety of the year.
The second chart is from December 1999 to 2003. Early 2001 looked great for the market just like January has this year. Some words of caution from Briefing.com's Page One today below the chart:
briefing.com
Page One
Last Updated: 30-Jan-23 09:04 ET | Archive
A sense of caution heading into a big week of market-moving news
There are two trading sessions left in the month of January, which is shaping up to be a fantastic month for stocks (and bonds). Entering today, the Nasdaq Composite is up 11.0% and the S&P 500 is up 6.0%. Naturally, we are hearing the maxim more and more that "As goes January, so goes the year."
It is a nice thought to be sure, even if it isn't always true. In 2001, for instance, the Nasdaq surged 12.2% and the S&P 500 gained 3.5% in January, yet they ended 2001 down 21.1% and 13.0%, respectively.
That was a different time coming off the dotcom bubble, but a case can be made that there was a bit of an "everything" bubble in 2021 that certainly saw its share of deflation across asset prices in 2022, if not an outright popping.
In any case, there is no disputing that the stock market is off to a good start in 2023. There appears to be a little nervousness this morning, however, that the good times will keep rolling in the same unabashedly bullish manner.
The S&P 500 futures are down 32 points and are trading 0.8% below fair value, the Nasdaq 100 futures are down 136 points and are trading 1.1% below fair value, and the Dow Jones Industrial Average futures are down 154 points and are trading 0.5% below fair value.
The cautious-minded tone can be chalked up to several factors:
- Concern the market has gotten ahead of itself and is due for a pullback trading at 18.0x forward twelve month earnings versus the 10-year historical average of 17.2x, according to FactSet data
- Pre-market weakness in the mega-cap stocks
- Worries that Fed Chair Powell will make an extra effort during his post-FOMC decision press conference on Wednesday to rein in the stock market's bullish behavior
- Hesitation in front of a multitude of market-moving events this week that include central bank policy decisions by the Fed, ECB, and Bank of England, the Q4 Employment Cost Index, ISM, and January Employment Situation reports, the OPEC+ meeting, and earnings reports from more than 100 S&P 500 companies, including Apple (AAPL), Alphabet (GOOG), Amazon.com (AMZN), and Meta Platforms (META).
From a news standpoint, there isn't a lot on the market's plate this morning, but it has been served something to think about by Nick Timiraos of the The Wall Street Journal, who wrote over the weekend that Fed officials are concerned that inflation could reaccelerate due to tight labor markets.
That missive fits in the environs of the camp that worries about the Fed continuing to raise rates and keeping rates higher for longer.
The 2-yr note yield is up three basis points to 4.24% and the 10-yr note yield is also up three basis points to 3.55%. Both got a jolt overnight after Spain reported a higher-than-expected 5.8% year-over-year increase in January CPI.
That should give the ECB something extra to think about ahead of its meeting. Frankly, there is a lot for capital markets to think about at this time, not the least of which is the understanding that central banks will have starring roles in driving this week's market action and the turn to February. |
