Now that we have crossed over into March investors are wondering where the stock market is headed. Is it going to be another month like February or is the tide going to turn?
Let’s find out together!
Historically
On money.com you can read that historically the S&P 500 index has been positive during the first two weeks of March historically. After that, the only way is up it seems, because of the fact that the index has had positive returns in March 64% of the time.
Moving on to the Dow March has historically been a great month, because of its tendency to perform better than the other indexes. Over the last 100 years, the Dow has gone up 58% of the time in March. However, when you study the historical data of this month for the last 50 years the Dow’s positive returns rise to 64%.
Finally, the big question on everybody’s mind is doing the poor performance in January and February impact this trend. The answer to this is not too much. According to strategists when the S&P 500 has performed poorly over the past few months, it did not impact the overall stock market returns in March.
What Do Investors Think?
Currently, almost every hardened investor is going to be monitoring the FED according to money.com. Every one of them is trying to figure out whether or not the FED is going to continue to raise interest rates. Since the start of 2022, they have done just that in their highly coordinated effort to battle rampant inflation. Although the latest raise in interest rates were significantly lower than previously, Jerome Powell has stated that it is likely that they will continue to raise rates.
Investors remain concerned about the potential economic crash that could occur. On forbes.com you can read that many investors are preparing for the worst. They are doing this by investing in alternative assets other than stocks. They have been purchasing stocks in the utility sector, the consumer staples sector, and the healthcare sector due to their perceived insulation from a recession.
What is Happening With Inflation?
Toward the end of 2022, the hangover from inflation seemed to be going away is stated on forbes.com. Inflation prices peaked in June and slowly started slowing down throughout the month of December. Data from January showed that inflation had paused altogether!
The CPI was 6.4% higher in January than expected by economists and it just stayed flat in December at 6.5%. By CPI I mean the consumer price index of course which is more widely known as the CPI. The PCE also rose by 5.4% and by PCE I mean the personal expenditures price index. All this was mostly due to the prices for used cars going down. Used cars have been so expensive, because of the lack of parts available and long waiting lists for new cars.
Recession Watch
Unfortunately according to the same source forbes.com, it still isn’t the time for the FED to start halting the rising interest rates. Due to the fact that they cannot justify this action with the job market heating up and rising inflation.
Another unfortunate truth that Americans must face is the more interest rates increase the more likely a long-feared recession. The FED employs regional banks that compile annual recession probability indexes that unfortunately displayed data that supported the idea of a potential recession.
Higher wages are on the agenda again it seems and that bodes well for workers. However, increases in wages heavily contribute to inflation. Businesses raise prices on products and services to cover these costs and that only affects the consumer.
Moving on to the debt ceiling proposal that was passed in congress reached its limit in January. However, Janet Yellen who is the treasury secretary has implemented some extraordinary measures to let the US government continue borrowing funds.
How should you Purchase Stocks in March?
Typically February has been one of the worst months historically for the US stock market according to Forbes. The S&P 500 has risen in March and April since 1928.
Investors started the new year on a high after the typical new year’s hope of all things going back to normal occurring among them. Unfortunately, the market is going to continue to be highly unpredictable and price fluctuations will occur a lot according to Chris Zaccarelli who is a chief investment officer for the Independent Advisor Alliance.
The advice to investors is to invest in safer types of stocks such as utility stocks, consumer staple stocks, and healthcare stocks.
Summary
To summarise this article the stock market is looking like it is going to take a turn for the worse in March. Therefore it is important to save cash to use when the prices of stocks drop and invest in safer sectors like healthcare.
