New records in reach

Mar 30, 2022 2 min read
New records in reach

The S&P 500 is on the verge of making new record highs. It is only 3.4% below its January 3 record high as of March 29! The fundamentals remain very strong with both S&P 500 forward revenues and earnings at record highs. I expected that. I didn't expect that the forward P/E would pop back up to 19.9 on March 29 given that inflation is likely to stay higher for longer and Fed officials have turned increasingly hawkish, signaling a 50bps FFR hike in early May. Consider the following related developments:

(1) The combination of Panic Attack No. 73 (attributable to January's taper tantrum) and Panic Attack No. 74 (Putin’s invasion in February) caused the 13.0% correction in the S&P 500 from January 3 through March 8. The S&P 500 is up 11.1% since the March 8 low despite lots of bad news about Ukraine, a more hawkish Fed, a flat 10-2 yield curve, a new Covid strain, and stagflationary economic data.

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