2.18.26 Market Volatility Persists, but Fundamentals Remain Supportive
Today's blog is written by Chris Fasciano, chief market strategist at Commonwealth. He represents Commonwealth in various media appearances, advisor speaking events, and Commonwealth conferences. He also oversees and mentors a dynamic team of investment research analysts who specialize in equity and fixed income markets. Prior to this role, Chris spent 10 years as one of the firm’s portfolio managers, involved with asset allocation and fund selection. With a deep background in small- and mid-cap stock research, Chris is uniquely positioned to analyze the latest economic data and offer valuable insights on navigating today’s volatile markets. Chris Fasciano is a guest writer and is not affiliated with LPL Financial.
U.S. equity indexes have wobbled over the last couple of weeks. Concerns about artificial intelligence (AI) hyperscale spending have hit the high-profile mega cap growth names. At the same time, concerns about the impact of AI on established businesses have rippled through the software and finance industries.
In the short term, markets are always susceptible to headlines and future concerns that haven’t yet come to fruition. However, over the long-term, fundamentals drive markets. And for the most part, they remain supportive.
Last week, the January employment report came in above expectations. Non-farm payroll jobs growth was reported at 130,000 which was almost double consensus estimates...
Since then, the trend has been slowly improving. This is a positive sign that the employment market might be stabilizing after the 75 basis points of Federal Reserve (Fed) interest rate reductions.
The core Consumer Price Index (CPI) also delivered somewhat better news last week. The January report showed year over year CPI running at 2.5%...
Fed interest rate decisions are driven by a focus on their dual mandate of employment and inflation...
Analysts were expecting S&P 500 Index earnings to grow 7.2%. By the end of the fourth quarter analysts had become more optimistic...
Nine of the 11 S&P 500 sectors have reported earnings growth on a year over year basis so far...
There are seven sectors with positive returns for the year, led by double-digit returns for basic materials, energy, consumer staples, industrials, and utilities...
Investors will always find and eventually allocate capital to relatively cheap valuations and improving fundamentals...
Diversification has historically been the best way to position portfolios for markets with broadening participation.
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