Illustration by Michael Haddad
11:45 a.m. Now that’s more like it.
The Dow Jones Industrial Average was down more than 300 points this morning, but has battled back and is off just 14.19 points, or 0.1%, at 23,313.27, while the S&P 500 is little changed at 2507.08, and the Nasdaq Composite has advanced 0.2% to 6,50.50.
That the market is opening lower and bouncing back is a much better sign than what we were seeing in December, when every rally turned into an excuse to sell. Does that mean we’re out of the woods? Hardly. But it’s still better than the alternative.
And there’s reason to be optimistic for 2019, even as we maintain a cautious bent toward the market. Wells Fargo’s Pravit Chintawongvanich notes that the S&p 500 dropped 6.2% in 2018, despite the fact that real earnings grew by 17%. That doesn’t happen very often—this is just the 15th time since 1950, according to Wells Fargo data—and the market was higher the following year in 12 of the previous occurrences. “It’s unusual for the multiple to compress so much when real EPS is up, as we show in the table below,” Chintawongvanich explains. “Typically stocks rally in the following year, unless the economy falls into recession.”
Write to Ben Levisohn at [email protected]