Equity Market Tracker

The Equity Market Tracker is a guide that informs our discussions and debate around the unique dynamics of the current U.S. equity market, how it compares to those past, and what the macroeconomic environment is telling us. While not an exhaustive list, the six variables in our table have frequently shown turning points in prior market cycles. The colors are assigned based on our view of whether each variable is signaling we are close to a bottom (green), further away (red) or a mixed picture (yellow).

Each variable, however, does not carry equal significance. We believe the humbling task of examining disparate variables for signs of market impact is just as much art as (we like to believe) science – thus a more qualitative approach is warranted.

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August update

• Since our last update U.S. equity markets have continued climbing and the U.S. Federal Reserve once more hiked rates. However, we see still some reason for caution ahead, as there still may be another Fed hike on the horizon, and the potential for a recession next year. It is uncertain how long the current equity market rally can be sustained.  
• Since our June update the Fed hiked one more time, but we expect the U.S. central bank to resume pausing while it waits for further data.

While it has only been just over a month since our last update the overall narrative and direction of the economy and markets continues to shift. The Fed raised rates one more time, bringing the Fed funds rate to 5.50%, but equity markets see brightening economic data as a sign that the hiking cycle may soon be reaching its end. 

The equity market for much of 2023 was driven higher largely by tech stocks, but we see increasing market breadth entering the rally as the market prices in a higher chance of a soft landing for the economy. This has led market breadth to rise from 36% in March to 66% now. Forward earnings estimates have also started to recover, now sitting at 3.2%, after declining to 0% expected growth in February.

Additionally, credit spreads have continued to tighten due to the lack of credit stress in the market.