The U.S. stock market has been very peaceful in 2023, and this has made investors curious about what it means. The main stock index, called the S&P 500, has not dropped by a lot (2% or more) in a single day for 113 days in a row. This has made experts wonder if this calmness will continue or if there might be turbulent times ahead. In this article, we will talk about why this calm streak is important, look at what happened in the past, and give tips to investors on how to handle possible ups and downs in the future.
A Calm Amidst Historical Volatility
The current calm streak in the U.S. stock market is noteworthy, especially when compared to historical data. Last year, 2022, was one of the most volatile years for U.S. stocks since 2009, with 46 daily swings of 2% or more in either direction. In contrast, 2023 has been strikingly calm, with no significant drops in the S&P 500 for almost six months.
The Impact on Stock Performance
The prolonged period of low volatility has been beneficial for investors. Since the last 2% drop on Feb 21, the S&P 500 has gained nearly 13%, and year-to-date returns have surpassed 18%. This extended period of stability has given investors a chance to profit from their investments.
The Echoes of History
While the current calm streak is remarkable, history teaches us that tranquility may not last indefinitely. Back in 2018, the S&P 500 enjoyed a 351-day streak without a 2% drop, but it was followed by significant market turbulence. Investors should remain cautious and prepare for potential market pullbacks in the future.
Embracing the Possibility of Increased Volatility
Financial experts are saying that the market might soon have a bigger drop, like 4% to 6%. They say that August and September are usually more unpredictable months for the market. Right now, things have been very calm, but that might change soon. Investors should be ready for a possible change in how people feel about the market, and they should prepare for ups and downs in their investments.
Economic Factors Shaping Market Sentiment
The U.S. economy is super important in how people feel about the stock market. Because of the COVID-19 situation, things have been uncertain, with interest rates and prices going up and down. Although some people were worried about a big economic problem, those concerns have decreased. However, some experts still think there might be a downturn, but they believe it might happen later than they thought before.
Impact of Earnings Reports
Earnings reports from companies listed in the S&P 500 significantly impact market sentiment. The second-quarter reporting season sheds light on consumer spending and economic health. As we approach the third quarter, analysts are cautiously optimistic about a slight increase in profit growth. However, these forecasts are subject to change as the period progresses.
Disney's Earnings and Hollywood's Woes
A lot of people in the news will be talking about Walt Disney Co.'s earnings report on Wednesday. They are interested in how Hollywood movie companies are dealing with the actors' strike that is happening right now. Investors want to know what Disney plans to do about their streaming services and how it will affect their stock value.
UPS Labor Agreement's Impact
United Parcel Service Inc. will tell everyone how they did in the last three months on Tuesday. At the same time, the workers' union called Teamsters will vote on a possible labor agreement. If the agreement is approved, it might mean the workers will get more money. This could make things better for the economy and businesses. Also, it might affect how much UPS charges for shipping and how well the company does financially. Many people are keeping a close eye on this situation.
Bottom Line
The stock market has been very calm lately, and investors have been making a lot of money with the S&P 500 going up a lot. But we should remember that when things are calm for a long time, it might mean that things could get shaky later on. As investors, we need to be careful and keep an eye on how the economy is doing, how companies are making money, and other important things that can affect the market. By getting ready for possible changes, we can make smart choices and protect our investments when things get uncertain. It's essential to stay calm and have a plan for the long term, so we can handle any ups and downs in the market without getting too worried.
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