It may be too early to tell, but it looks like stocks may finally be entering a correction phase after rising steadily since November.
The S&P 500 is trading at 1617 today, down 4.1% from the May 22 peak at 1687.
In his latest monthly report, BMO Chief Investment Strategist Brian Belski passes along some insight from conversations with clients, helping to pin down the vibe in the marketplace (emphasis added) :
Another month and another record level for the S&P 500 Index. From our perspective, very little analysis, process and common sense is being applied by many investors when making investment decisions at current levels. In fact, we are getting the sense that too many investors are currently expecting higher stock prices tomorrow just because they were higher today. Consequently, our fundamental models (which are a key input to our market outlook) continue to show little improvement in the aggregate over the past several months.
The good news is that the earnings environment is improving, with the pace of growth now above historical norms. On the other hand, valuations continue to climb, and efficiency and liquidity measures, while still strong, are in a downward trend. In addition, many important economic data points have disappointed lately. Therefore, we remain skeptical about the market’s steep advancement and would expect some sort of pullback in the coming months unless the fundamental or economic backdrop improves very soon.
Even though the S&P 500 has already cleared 1600 and is trading this morning around 1617, Belski is sticking to the 1575 year-end target he set in December.
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