By James T. Tierney, Jr.
US stocks have been volatile recently as investors try to decipher the Fed. But chasing monetary policy winds isn't a good investing strategy. Recent market trends indicate that company fundamentals are a better guide to equity returns.
Investors in US equity markets are experiencing big mood swings. The S&P 500 (SPY) fell by 2.5% on Friday, September 9, amid concerns that the Fed might soon raise interest rates. On the following Monday, the market recouped most of its losses on fresh signals that the Fed might take its time. Volatility continued through the rest of the week.
Amid the commotion, the second-quarter earnings season, which ended just a few days earlier, was left in the dust. Yet, we believe recent earnings and trading trends provide some important signposts for equity investors preparing for third-quarter earnings in just a few weeks.
Lower US Stock Correlations
During…