Investors could make a long list of threats to the stock market. But so far, it’s all on paper. The nine-year-plus bull market keeps grinding on.
The average U.S.-stock fund registered a total return of 2.5% for July, according to Thomson Reuters Lipper data, thanks largely to strong corporate earnings. Even the slide in well-known tech stocks didn’t hold down the overall market. The U.S. funds are up 5.9% for the year to date.
International-stock funds continue to trail their American cousins—up 2.1% for July but still down 0.7% so far this year.
John Serrapere, director of research at Arrow Funds in Laurel, Md., is struck by how the market remains calm despite the headwinds — stock valuations, bond-market credit quality, geopolitical upheaval. Through it all, the market’s fear meter, the Cboe Volatility Index, remains low.
“The biggest disconnect in the market is how the VIX is priced,” says Mr. Serrapere. “For a brief period in February we had that surge in volatility, and now it’s gone away.”
Perhaps it’s all about the earnings and economic indicators. Omar Aguilar, chief investment officer for equities at Charles Schwab Investment Management, San Francisco, sees challenges like trade disputes and the potential for an overheated economy if the Fed can’t control it. Yet earnings are relentless.
“We are in an environment that is actually pretty benign for risky assets,” meaning stocks in general, he says. “It’s looking pretty good in terms of what the solid, hard data is, whether U.S. GDP growth or the latest readings on Europe or Japan.”
Bond funds were little changed in July. Funds focusing on intermediate-maturity, investment-grade debt (the most common type of bond fund) were up 0.1%, leaving their year-to-date decline at 1.6%.
Still, what about that turmoil in Washington? The market often reacts to it, but just as quickly moves on.
Jae Yoon, chief investment officer of New York Life Investment Management, says, “It is really day by day for investors with the headlines. But there is some positive momentum that is still allowing us to recover from low points.…Our view is that equity markets will finish the year at new highs.”
Read more see, The Eight Best Predictors Of the Long-Term Market
BY WILLIAM POWER