\nIt’s free but also time-sensitive, so you are\nencouraged to download Zacks’ Stock Market Outlook Report right now.<\/p>\n\n\n\n
This 22-page report is packed with some of our key forecasts and facts\nto consider as you look at the remainder of Q2 and the rest of 2019:<\/p>\n\n\n\n
- For how long will 2019 stay bullish?<\/em><\/li>
- Zacks global markets\u2019 outlook<\/em><\/li>
- What sectors show the best opportunity?<\/em><\/li>
- What industries within those sectors most merit your attention?<\/em><\/li>
- Forecast for the S&P<\/em><\/li>
- Small-cap vs. large-cap returns<\/em><\/li>
- And much more.<\/em><\/li><\/ul>\n\n\n\n
If you\nhave $500,000 or more to invest and want to learn more about these forecasts,\nclick on the link below to get your free report today!<\/p>\n\n\n\n
IT’S FREE. Download the May 2019 Stock Market Outlook Now<\/a>1 <\/a><\/sup>>><\/a><\/strong>\u00a0<\/p>\n\n\n\n
\n\n\n\nHere\nare three lessons I took away from Q1. <\/p>\n\n\n\n
Lesson #1: \u201cV-Shaped\u201d Bounces are Real!<\/strong><\/p>\n\n\n\n
By\nthe numbers: <\/p>\n\n\n\n
I point out the technology sector\u2019s\nperformance because it offers a good case study in another lesson \u2013 that,\noften, what gets hit the hardest on the way down often bounces back the\nstrongest on the way back up.<\/p>\n\n\n\n
The S&P 500 hit its high-water mark in\n2018 on September 20, at the 2,930 level. From there, equity investors endured\nsteep declines all the way through to December 24, when the S&P 500\nbottomed out at 2,351. That\u2019s a nearly 20% price decline over the course of three\nmonths and one week, for readers keeping score.3<\/sup><\/p>\n\n\n\n
But\ntaking a look at the chart below, it becomes clear that the market followed a\n\u201cv-shaped\u201d pattern \u2013 recovering almost as quickly as it declined. The red arrow\non the chart represents about three months and one week, while the green arrow\nrepresents just under four months \u2013 almost an equal amount of time! The key\nlesson for investors to remember: volatility\nworks both ways.<\/strong> <\/p>\n\n\n\n
![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2019-05-04-MOTM-Image-1-of-1-1024x412.png\")
<\/figure>\n\n\n\nSource: Federal Reserve Bank of St.\nLouis<\/em><\/strong><\/p>\n\n\n\n
Lesson #2:\nLate in an Economic Cycle, Fed Policy Matters (A Lot)<\/strong><\/p>\n\n\n\n
The Federal Reserve\u2019s\nshifting position on monetary policy has been a crucial driver of market\nmovements in the last six months, in my view. <\/p>\n\n\n\n
The synchronization is\nalmost aligned to the day. On September 26, the Federal Reserve raises rates a\nquarter point, and the market enters a downturn.4<\/sup> On December 19, the\nFederal Reserve raises rates again, and some of the steepest drops occur\nleading up to Christmas Eve.5 <\/sup>Then, between Christmas and the new\nyear, the Federal Reserve starts to tone down hawkish language, vowing\n\u201cpatience\u201d and giving the market a signal that it may pause hikes in 2019\n(market starts to rally). Finally, on January 30, the Fed says\n\u201cthe case for raising rates has weakened somewhat,\u201d with the market seeing this\nstatement as the Fed fully walking back its previous position. With the market\nnow expecting no further rate hikes in 2019, the market arguably locked into an\nuptrend that has now seen it reclaim an all-time high. <\/p>\n\n\n\n
As mentioned, no further rate hikes are\nexpected in 2019. But investors would be wise to keep an eye on all Fed\nmeetings and minutes moving forward. Since the interest rate \u2018pause\u2019 has given\nstocks more runway for moving higher, we believe that once rate hikes re-enter\nthe picture, we should reasonably expect the headwinds to return. <\/p>\n\n\n\n
Lesson #3: Beware the Temptation of Technology IPOs<\/strong><\/p>\n\n\n\n
2019 is by many\naccounts the \u201cyear of the IPO,\u201d with several of the biggest and trendiest names\nin tech set to start trading on the public markets (think Uber, Lyft,\nPinterest, Slack, etc.). These are exciting names for market watchers,\nparticularly those who follow the tech sector closely. Some of these companies\nhave revolutionary technology that could change the nature of the economy and\njobs in big ways. <\/p>\n\n\n\n
But most of them\naren\u2019t profitable yet, and I believe investors should proceed with caution. <\/p>\n\n\n\n
According to University\nof Florida finance professor, Jay Ritter, in 2018 \u201c81% of American companies were unprofitable in the year leading up to\ntheir public offerings.\u201d <\/em>81%!6<\/sup><\/strong><\/p>\n\n\n\n
Remember that at the\nend of the day, billion-dollar valuations for new IPOs is by no means an\nindication that the company is stable and has a bright future. A billion-dollar\nvaluation does not mean the company is producing billions of dollars in revenue\nor that it makes a nickel of profit! A recent study by the National\nBureau of Economic Research concluded that, on average, \u201cunicorns\u201d are\napproximately 50 percent overvalued. And when a company is overvalued, the\nmarket won\u2019t take long to adjust its share price.7<\/sup> <\/p>\n\n\n\n
Our research clearly\nshows that the stock of profitable companies as measured by either historical\nor projected earnings per share outperform the stock of unprofitable companies.\nWe think this could contribute to why recent IPOs underperform over time \u2013\nuntil profitability is consistent the stock of a recent IPO is being purchased\non the story being told not the fundamentals.<\/p>\n\n\n\n
Bottom Line for Investors <\/strong><\/p>\n\n\n\n
The first quarter\ndelivered a much-needed respite from the downside volatility endured during Q4\n2018. But it also serves as a key reminder that volatility works both ways, and\nthat trying to time the markets or predict what will happen is often a feckless\npursuit. Similarly, investors may try to get in front of a Fed policy decision\nor to get in early on an IPO, but there are substantial risks to both. Sometimes\nthe best results are achieved by stepping away from the noise and choosing patience\nand a long-term mindset instead. That\u2019s what I would do. <\/p>\n\n\n\n
In the meantime, I recommend keeping an eye on stay fundamentals and staying focused on the entire market picture. To help you do this, you are invited to download our Just-Released Stock Market Outlook report for May 2019.<\/a><\/strong><\/p>\n\n\n\n
This Special Report is\npacked with our newly revised predictions for Q2 and the remainder of 2019 that\nwe believe can help you base your next investment move on hard data. <\/p>\n\n\n\n
For example, you’ll discover\nZacks\u2019 view on: <\/p>\n\n\n\n
- For how long will 2019 stay bullish?<\/em><\/li>
- Zacks global markets\u2019 outlook<\/em><\/li>
- What sectors show the best opportunity?<\/em><\/li>
- What industries within those sectors most merit your\n attention?<\/em><\/li>
- Forecast for the S&P<\/em><\/li>
- Small-cap vs. large-cap returns<\/em><\/li>
- And much more.<\/em><\/li><\/ul>\n\n\n\n
If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!
\u00a0
IT’S FREE. Download the Just-Released May 2019 Stock Market Outlook<\/a>8<\/a><\/sup><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"The first quarter of the new year was an encouraging one for equity investors. Stocks rallied strongly, and the media […]<\/p>\n","protected":false},"author":3,"featured_media":7430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63],"tags":[],"class_list":["post-8016","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8016","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8016"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8016\/revisions"}],"predecessor-version":[{"id":10763,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8016\/revisions\/10763"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8016"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8016"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8016"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
- Zacks global markets\u2019 outlook<\/em><\/li>
- Zacks global markets\u2019 outlook<\/em><\/li>