Market’s best quarter in nearly 10 years could be followed by gains

The first quarter is on track to be the best in nearly 10 years, and the best start to the year for the S&P 500 since 1998. While it’s not likely to repeat those gains, analysts say the second quarter could be good for stocks even with some bumps.

Source: Bespoke

But Bespoke also notes that when the S&P has gained more than 5 percent in a quarter, followed a quarter with a sharp decline of 10 percent or more, like this year’s first quarter, the subsequent quarter was then higher most of the time with an average gain of more than 9.6 percent.

There have been 10 such instances since 1970, and in all but two, the follow up quarter, which in this case would be the second quarter, were all positive.

Another case can be made for a positive second quarter performance when studying the performance of the market after a decline of 10 percent or more. According to Bespoke, before last year’s fourth quarter, there were 19 such quarters since World War II, and a year after those quarters, the S&P was up an average 15.9 percent. The market was also mostly higher two quarters later, for an average gain of 11.3 percent.

Source: Bespoke

The S&P 500 has been testing both sides of 2,800 and ended Thursday at 2,815. Emanuel said the market is not out of the woods yet, after the S&P 500 recently peaked at 2,860.

“We’re for the moment in one of those paradigms where low rates are looked at as a risk factor rather than a tailwind,” he said.

Emanuel said both Brexit and China trade talks could result in a move either way in the market.

“Geopolitical issues, Brext and the trade deal with China, investors have become numb to the constant barrage of news on both fronts because there have not been any developments of substance. It’s all just noisy back and forth,” Emanuel said. “The minute investors see something out of either of those things that they perceive to be substantial developments, markets will react.”

Source: Bespoke

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