Spreadex Market Update
Speculation whether or not equities can continue with their incredible run
Ever since the turn of the year, market participants have been speculating whether or not equities can continue with their incredible run after all major indices added significant gains in 2013. Focusing on the SPX 500, more than 90% of the 500 equities comprising the index advanced. Equity funds attracted more than $160 billion in 2013, the most since 2000.
One significant statistic to bear in mind is that American stocks have never retreated after gains were as substantial in the past as they were in 2013. The S&P 500 rose 13 percent the year after 427 companies increased in 2009, whilst in 1997 when 402 stocks ended higher, the SPX 500 added 27 percent the next 12 months. Much of the gains seen in 2013 have been credited to a rotation from bond funds to equity funds.
Whilst analysts seem to agree that the valuation of equities is by no means overvalued, there seems to be a conflict regarding whether or not the market has accounted for improving earnings. Additionally, stocks may suffer as the Federal Reserve begins to taper its bond-buying programme this year. The central bank said on December 18th that it would cut its monthly purchases by $10 billion to $75 billion, citing an improving economy.
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