With February trading closed, winter’s grip is loosening, and investors look forward to an improvement in the weather and the global economy, notes chief investment strategist Sam Stovall, in CFRA Research's flagship newsletter, The Outlook.
In anticipation of this recovery, investors bought into equities, pushing the S&P 500 higher by 3.1% month-to-date through February 25, bested by mid-cap, small-cap, and value stocks. What’s more, 74% of the 147 sub-industries in the S&P 1500 were higher on the month.
What do investors have to look forward to in March? A series of fourths. Since WWII, the S&P 500’s average price return was fourth highest of all months and its frequency of recording a monthly gain was also fourth best.
Additionally, despite March’s reputation for entering or exiting like a lion or lamb, these solid returns were greeted by subdued fanfare, since March’s average volatility came in fourth lowest.
Indeed, all sizes, styles, and sectors recorded average advances in March since 1995, led by the consumer discretionary, energy, and materials sectors, along with nearly nine out of 10 of the S&P 1500’s sub-industries.
Stocks and bonds recently slipped as investors evaluated the likely effects of increased stimulus on expectations for inflation and interest rates.
Despite the ever-present threat of a near-term pullback, we continue to favor equities in the coming year as we think the spike in interest rates will be temporary, as they reflect 2021’s early economic expansion versus 2020’s contraction.
As a result, CFRA raised its 12-month target for the S&P 500 to 4,265, indicating a near-10% price appreciation potential through the end of February 2022. This new forecast is heavily influenced by CFRA equity analysts’ cap-weighted target price growth expectations for the companies in the S&P 500.
Companies from the S&P 1500 sub-industries with the highest average gains in March are: Akami Technologies (AKAM), Best Buy (BBY), EQT Corp. (EQT), Dollar General (DG), TJX Corp. (TJX), Nike (NKE), Air Products (APD), and Carrier Global (CARR).