A couple of paychecks, maybe a haircut and a trip to the movies -- not much typically happens in a month. But for investors waiting for the next all-time high in U.S. stocks, it’s actually been a long time.
While equity indexes from Asia to Europe have climbed to multiyear highs in recent days, the Standard & Poor’s 500 Index and Dow Jones Industrial Average last hit theirs on March 2, the same day the Nasdaq Composite Index topped 5,000 for the first time in 15 years. The 32-day stretch without celebrating a fresh high is the S&P 500’s longest since July 2013.
“We think the investor has gotten a little bit spoiled,” said Jim Russell, a Cincinnati-based portfolio manager at Bahl & Gaynor Inc., which has about $8 billion under management. “The market has reached a valuation level where more things have to go right, in that earnings have to come in strongly and interest rates have to remain low. Without the Fed in QE, fundamentals matter more this year.”
In most respects, American equities occupy the same space they did in 2013 and 2014, preserved from protracted losses and never more than 3.7 percent away from the high hit on March 2. It’s been three years since the S&P 500 experienced a 10 percent drop and measures of options-based volatility are below historical averages.
Still, day-to-day swings have been more pronounced. The S&P 500 slid in five of seven sessions from March 2 through March 11, including two declines of 1.4 percent or more, amid concern a stronger dollar and lower oil prices would hurt earnings as the Federal Reserve considers raising rates.
The S&P 500 dropped 1 percent to 2,084.65 at 9:47 a.m. in New York as companies from Advanced Micro Devices Inc. to American Express Co. slid on earnings reports and Chinese regulators updated rules on margin trading.
Over the last year, the S&P 500 has averaged just eight days between highs. The measure has reached an all-time high on five occasions in 2015, all occurring in an 11-day span ending March 2.
While the Fed ended its monthly bond-buying program last year and considers boosting borrowing costs, accommodative central banks from Asia to Europe have fueled a global equities rally. The Stoxx Europe 600 has surged 20 percent in 2015, taking out a 15-year-old record this month, while the Shanghai Composite Index has nearly doubled in the past year to close Thursday at the highest since 2008.
U.S. stocks also entered a stretch of the year when companies customarily suspend share repurchases, a force of buying activity that has buoyed the bull market, before reporting quarterly results.
The S&P 500 has yet to completely recover from two declines of more than 2.5 percent since its last record. Investors have been juggling reports indicating economic growth is tempering, mixed signals from the Fed on its stance regarding interest-rate increases, and what is forecast to be the S&P 500’s worst earnings season in five years.
“There are a lot of balls in the air with regard to the timing of a Fed rate increase and the strength of the economy,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama. “These questions need to be answered before we see this market break out of resistance.”
The S&P 500 declined 3.6 percent from the record by March 11, before recovering to within 0.5 percent of the high in the next seven sessions. Stocks then tumbled 2.5 percent in four days as a selloff in biotechnology and chip companies dragged the rest of the market with it.
The S&P 500 has gained back most of that ground this month, closing Thursday 0.5 percent short of the record, amid a rebound in oil prices that has turned energy producers from first-quarter laggards into leaders.
Investors have shed portfolio hedges as stocks have oscillated in a 52-point range in the past four weeks. The Chicago Board Options Exchange Volatility Index fell 1.9 percent to 12.6 Thursday, hovering around a four-month low.
The VIX, a gauge of S&P 500 options costs, soared 10 percent to 13.9 today in trading.
Volume has suffered as traders have remained reluctant to make decisions in a range-bound market with so many unknowns lingering, according to Jordan Irving at Irving Magee Investment Management. About 6.2 billion shares have changed hands on U.S. exchanges each day in April, putting it on pace for the slowest month of trading this year.
“When the Fed has been as stimulative as they’ve been over the last couple years, that was the obvious trade,” Irving, co-founder of Conshohocken, Pennsylvania-based Irving Magee, said by phone. “I don’t think there’s an obvious trade to jump in on any more. Folks are taking a wait-and-see approach, just sitting on their hands for now.”