The S&P 500 index continues to flirt with its record high, but many analysts see the market's pullback and volatility last week as a sign that more of the same is on the way.
"I do think it is going to be volatile. It is just going to be a bumpier ride," Leo Grohowski, chief investment officer at BNY Mellon Wealth Management, tells The Wall Street Journal
The S&P 500 fell 2.2 percent last week, and biotechnology stocks were especially hard hit. The S&P Biotechnology stock index dropped 6.6 percent in the first four days of the week.
Meanwhile, price-earnings ratios indicate stocks may be overvalued. Robert Shiller's cyclically adjusted price-earnings ratio for the S&P 500, which includes 10 years of earnings, stands at
27.4, topped only by 1929, 2000 and 2007. Those, of course, were periods that preceded market crashes.
And it looks like first-quarter reports will be nothing to write home about, with analysts forecasting a 4.6 percent drop in earnings for S&P 500 companies, according to FactSet.
Meanwhile, the stock market has historically performed better during the first two weeks April than during the first two weeks of other months. Is the IRS to credit?
Dennis Slothower, publisher of "On the Money" and other newsletters, wrote several years ago that "the government has a vested interest in making sure there is plenty of liquidity in the marketplace for those needing to pay what is shortly due Uncle Sam," reports MarketWatch columnist Mark Hulbert
So the government will act to make "sure the [stock] market holds together as best it can going into Tax Day," Slothower says.
That sent Hulbert in search of data.
He found that since 1955, when April 15 became the tax payment date, the Dow Jones Industrial Average has averaged a gain of 1.2 percent during the first two weeks of April. That compares with an average of only 0.3 percent for the first two weeks of all 12 months.
This doesn't mean the IRS is behind's the first half of April's outperformance, Hulbert acknowledges. "Yet it remains a likely culprit," he writes. "I couldn’t find support for the other possible explanations I could think of."
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