Hello TipRanks Members,
(Please remember that after today’s market commentary I share my “Stock of the Week”.)
The breakout to new highs has already taken place this week with more gains likely on the way. Once we took out the January high of 2872, then 2900 fell soon afterwards. Sure we may flirt under every now and then… but that is just part of the markets typical “2 steps forward, 1 step back” dance.
What was the catalyst for the breakout?
We discussed this in previous commentaries. All the economic positives were already in place including Q2 GDP growing at a robust +4.2% clip. Plus we just enjoyed another strong earnings season. The key was for more investors to start believing that trade talks would come to a peaceful conclusion. And yes, the odds of that outcome do keep improving.
What happens now?
Barring some unforeseen negative event, stocks should cruise up to 3000 on the S&P 500 without much fuss. Once there it will find pretty stubborn resistance followed by an extended consolidation period to digest recent gains. And yes, that could morph into a 3-5% pullback, which is quite natural. Then probably settle in around 3000 at year’s end which would be a healthy 12% return on the year for the S&P.
Long term investors don’t mind such short term market antics. We just align ourselves with the prevailing winds, which continue to blow our portfolios to new heights.
Stock of the Week: MasTec (MTZ)
Construction is one of the best growth trends late in the economic cycle. That is because capacity utilization continues to increase leading to a demand for more capacity which necessitates more construction. In the case of MasTec, we are talking about the demand for more infrastructure including broadband, electric grid and oil & gas pipelines. |