Market momentum, global participation, and technical support all provide reasons to think gains may not be over for 2019. While volatility is always possible, record highs need not be be feared, and seasonal tendencies may remain a tailwind.
MORE ROOM TO RUN
The S&P 500 Index is currently on pace for its best year since 2013, up more than 25%. However, technical analysis is based on the idea that a market in motion may stay in motion, and six of the last seven times the index gained more than 20%, the following year saw double-digit gains. Context is also important, so while year-to-date numbers might look large, the index has gained only 9% since the January 2018 peak. In addition, and in contrast to moves earlier in the year, more cyclical sectors have been leading the market higher, with financials, industrials, and technology the top-performing sectors over the past three months. Finally, seasonality also may be a tailwind, with the November through April period historically representing the best six-month period for stocks, on average.
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