The stock market is in a perpetual state of flux, with each day bringing new highs and lows. But investors should take comfort in the fact that a few key indicators suggest the market is currently on solid footing.
The monthly sector performance charts suggest that the downside risk is currently limited. The charts track the performance of eleven S&P 500 sectors over a one-month period and are regularly updated to reflect the ever-changing dynamics of the market. While there may be some areas of the market that are at risk, such as Technology and Financials, the big picture suggests that the market is relatively stable.
At the same time, the Consumer Confidence Index (CCI) is an important indicator of economic health. Currently, the CCI is at a historically high level, suggesting that consumers have renewed optimism about the future. This is a positive sign that suggests consumer spending (which makes up 70% of all economic activity) will remain strong and continue to support the market.
Lastly, it is important to remember that November and December are traditionally strong months for the stock market. Over the past several years, the market has consistently delivered gains over the course of the holiday period. This could signal that the current market trend will continue into the final months of 2020.
Given the current indicators, it is likely that the market will remain strong over the coming months. Of course, it is still important to watch the individual sectors and track macroeconomic trends in order to make informed decisions. Yet, the monthly sector performance charts and other indicators suggest that downside risk is currently limited.