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.

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