Some stock market charts to consider as we look forward

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Stocks rallied again, with the S&P 500 climbing 2.7% last week. The index is now up 11.8% from its October 12 closing low of 3,577.03 and down 16.6% from its January 3, 2022 closing high of 4,796.56.

The past two weeks have come with loads of new data, and a lot of analysts returning from break published tons of fresh research.

Here are a few charts about the market that stood out:

The S&P 500 is off of its lows. (Source: Yahoo Finance)

Financial obligations have been manageable

β€œTo date, higher interest rates have not negatively impacted margins,” Jonathan Golub, chief U.S. equity strategist at Credit Suisse, wrote in a January 4 note to clients.

To illustrate this, Golub share this chart of S&P 500 interest expenses as percentage of revenue.

For more on the implications of higher interest rates, read β€œThere’s more to the story than ‘high interest rates are bad for stocks’ 🀨,β€œ β€œBusiness finances look great πŸ’°,β€œ and β€œWhy repaying $500 can be harder than repaying $1,000 πŸ€”β€œ

Companies are investing in their business

β€œDespite macro uncertainty, capex spending has remained strong, accelerating to +24% YoY in 3Q, driven by Energy and Communication Services,β€œ Savita Subramanian, head of U.S. equity strategy at BofA, observed on Friday.

BofA expects the U.S. economy to go into recession this year.

β€œAlthough capex is typically pro-cyclical, we see several reasons that capex will be more resilient during this recession than in the past, including persistent supply challenges, the need to spend on automation amid wage inflation/tight labor market, reshoring, underinvestment by corporates for decades, and the energy transition.β€œ

For more on capex spending, read β€œ9 reasons to be optimistic about the economy and markets πŸ’ͺβ€œ and β€œThree massive economic tailwinds I can’t stop thinking about πŸ“ˆπŸ“ˆπŸ“ˆ.β€œ

Watch for stocks to decouple during earnings season

β€œWe look for price dispersion to rise over the next ~6 weeks as it has done throughout prior earnings seasons,” Mike Wilson, chief U.S. equity…


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