US Equities
The S&P 500 is up more than 20% from its October low. Did we just start a new bull market? We don’t think so, we see this as more of a head fake. This rally shares characteristics of the late stage with narrow leadership, growth beating value and large beating small.
In a historical context these characteristics are not consistent with the start of a new bull market.
The more plausible narrative is that we prematurely entered a bear market. There are long lags to monetary policy and there are some unique factors that may have extended these lags, such as high savings rate and a tight labor market. So without much evidence of an economic downturn the market is popping its head up like a groundhog wondering if winter is over.
Our base case continues to be that the economy falls into a mild recession likely starting late this year or in 2024. In terms of market positioning we’ve been taking somewhat of a cautious approach to the market, but are willing to add some risk if the price is right. We see small and mid cap stocks as being priced right, in other words priced for a downturn. Using the S&P indexes which screen out non-earning companies, we find that small and mid cap stocks look very cheap relative to history and cheap relative to large caps.
Our base case continues to be that the economy falls into a mild recession likely starting late this year or in 2024. In terms of market positioning we’ve been taking somewhat of a cautious approach to the market, but are willing to add some risk if the price is right. We see small and mid cap stocks as being priced right, in other words priced for a downturn. Using the S&P indexes which screen out non-earning companies, we find that small and mid cap stocks look very cheap relative to history and cheap relative to large caps.
To find more of our thoughts on domestic equities please visit our website at touchstoneinvestments.com
This commentary is for informational purposes only and should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation to buy, sell or hold any security. Investing in an index is not possible. Investing involves risk, including the possible loss of principal and fluctuation of value. Past performance is no guarantee of future results.
Please consider the investment objectives, risks, charges and expenses of a Fund carefully before investing. The prospectus and the summary prospectus contain this and other information about the Funds. To obtain a prospectus or a summary prospectus, contact your financial professional or download and/or request one at TouchstoneInvestments.com/literature-center or call Touchstone at 800.638.8194. Please read the prospectus and/or summary prospectus carefully before investing.
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