Why a sideways stock market could indicate the highs are yet to come
Major indexes sit a percentage point or two away from all-time highs as stocks flip between small gains and losses on Monday, but over the past 12 months the market has advanced only modestly—feeding the notion among some investors that equities may be in the process of putting in a top for the cycle, said Joseph LaVorgna, chief economist for the Americas at Natixis, in a note.
Bears contend the stock market’s
largely sideways action over the last year signals a top may already be near, if not already established. But that would be out of keeping with recent history, says one economist.
But there’s a rub, he said. “Some investors have speculated that the market might be topping out ahead of a possible U.S. slowdown over the next year,” LaVorgna wrote. “However, this would be very unusual, as equities have always had a double-digit rally before the economy experiences a downturn.” (See table below.)[more]
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