Stocks fell Tuesday as Wall Street marked one year since the S&P 500 bottomed after a 30% tumble over 22 days due to the Covid-19 crisis.
Here's what experts say about the markets now.
Ryan Detrick, senior market strategist at LPL Financial, shares what historical comparisons indicate for future growth.
"We're up 76% on the S&P in the first year, and that does top the best first year ever from 2009 up just under … 70% or so. But here's the key thing. At LPL Research we took a look at all the 30% bear markets since World War II. There have been six of them, so we're not talking 20% corrections, we're talking the big ones like we had. The amazing thing … year two, which … starts today, was higher every single time, up almost 17% on average. So the thing we're trying to tell our more than 17,000 LPL advisors is this: This is still a young bull market; this is still a young economic cycle of growth. It's going to be rocky; it's going to be choppy; it's not going to be easy. The average pullback in that year two is about 11%. So, we wouldn't be surprised at all if this is an above-average bounce, maybe you have an above-average correction. But one year from now, history tells us … we're probably going to have a continued bull market and continued higher prices."
James McDonald, CEO of Hercules Investments, explains the recent market rotation.
"The energy behind the buying and that bull market is finding a place to go. We saw the Nasdaq stop going up … We've seen pressure in the Nasdaq. During that same period the Russell 2000 took another two extra legs up, and so we're at 52-week highs on the Dow, the S&P, the Russell. The Nasdaq's weakening simply meant the money went somewhere else, and so we can call it a rotation or we can call it a follow-through of the bullish energy that we've seen."
Jim Cramer, host of CNBC's "Mad Money," recalls how markets reacted one year ago Tuesday.
"[Treasury] Secretary [Steven] Mnuchin at the time said that they were very close to getting a [stimulus] deal, but the Dow was down 800 points. Apple closed that day below $1 trillion. Only Microsoft was a trillionaire company. There were a lot of downgrades that day … but right then, we got the bifurcation. What was screaming higher? Okay, Zoom, DocuSign, Teladoc, Etsy, Shopify, PayPal, Square. Those were on the move, those were going up, as people started realizing there are two economies."
Meghan Shue, head of investment strategy at Wilmington Trust, sees good and bad in these markets.
"We're very constructive on the equity market. I would say there are some downside risks out there but there's also some upside risks. So we're looking at expectations for earnings and revenue at the overall index level to be returning to pre-pandemic levels over the next 12 months. But we're not seeing as much encouragement in terms of expectations for that return to pre-pandemic levels for some of the more cyclical sectors, so we think there's some upside there still in some of the cyclical areas of the market."
David Bailin, chief investment officer at Citi Private Bank, breaks down expectations for earnings growth.
"We think the markets are priced in for what earnings growth will be this year. So, for example, it's expecting … between 20% to 25% earnings growth rate. When we look out to 2022, we're still looking for 12% to 15% earnings growth next year, and that would bring the P/E ratio for the S&P to between 18.5 and 19, which I think is an acceptable level. So a lot of 2021 is priced in right now. When we think about areas of value in the market, there are plenty. I think that there are areas in health care, there are areas in growth and dividend stocks."
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