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Chart of the week

Stocks trapped in (an expensive) trading range?

Stocks have spent the last year range-bound. This week’s chart looks at the challenges they may face moving materially higher.

April 21, 2023 | 2 minute read

A year-long trading range for the S&P 500

Source: Bloomberg Finance, L.P, as of April 19, 2023. Forward EPS based on projected earnings over the coming 12 months.

  • Following a historically poor showing in 2022, U.S. stocks have seen a substantial rebound this year driven by resilient economic data, hopes the Federal Reserve may be near the end of its rate hiking cycle and, more recently, falling Treasury yields.
  • Despite the more upbeat tone, the S&P 500 has largely traded in a range between 3,500 and 4,200 for the past year.1
  • Absent the outsized gains of the largest stocks (AAPL, MSFT, AMZN, NVDA, among others) that benefited from falling Treasury rates, the S&P 500 would have been nearly flat in Q1 2023.1
  • The S&P’s returns over the past two quarters also have come against a backdrop of falling earnings (black line), meaning today’s valuations of approximately 18.5x are well above their long-term average.1  
  • Against this backdrop, challenging conditions for publicly traded U.S. stocks highlight the need for flexibility, alternative sources of growth and active management, particularly as international stocks have outperformed YTD. 

  • Bloomberg Finance, L.P, as of April 19, 2023. Forward EPS based on projected earnings over the coming 12 months.

The chart of the week and any accompanying data is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The chart of the week is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such market commentary. The chart of the week should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the chart of the week or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.

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