It’s official, 2020 is now in the rear-view mirror. While the last 12 months have surely taken their toll on life around the world, we have rebounded and now look forward to a new year with new opportunities. We also must keep a watchful eye out for any new challenges resulting in rounding up the usual suspects…inflation, unemployment, recession.
In spite of the problems posed by the pandemic, U.S. equity markets fared well last year. The S&P 500 was up over 16% and the tech-heavy Nasdaq posted a return of almost 44%. Now, we turn our attention to a new year and the beginning of a new earnings season. Fourth quarter 2020 earnings results will begin in a couple of weeks.
As of last Wednesday, we have seen a development that has only occurred eight times since 1980. The New York Stock Exchange Hi-Lo (NYSEHILO) index has remained above a 90% reading for 30 consecutive days. When this happens, the broad market tends to perform very well over the next few years. I won’t bore you with the details of the calculation of this index, but since it only happens approximately twice a decade and typically with positive results, we pay particular attention when it occurs.
As you can see from the chart, with the exception of 2004 and a slight blip in 2009, the S&P 500 has posted positive gains over the following two years after three months. It will be interesting to see how things progress this time.
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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.
Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc., and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Securities offered through Triad Advisors, member FINRA/SIPC. Investment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors.