U.S. equities and stock exchange traded funds maintained momentum Thursday after data revealed the economy expanded at a faster-than-expected pace in the fourth quarter.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were up 0.2% Thursday.
The equities market has been looking for any excuse to break from its tight range in the past few sessions as investors sought any positive indicators after the failed healthcare bill dented the markets’ perception of President Donald Trump’s pro-growth agenda, reports Tanya Agrawal for Reuters.
“The market has been a lot more resilient in the face of the failure to repeal Obamacare than I might have guessed a month ago,” Mark Heppenstall, chief investment officer of Penn Mutual Asset Management, told the Wall Street Journal. “I think part of the reality is that earnings are turning a corner and the economy looks like it’s on strong footing.”
The markets also picked up after the Commerce Department revealed gross domestic product increased at a 2.1% annualized rate instead of the previously reported 1.9% pace, reports Lucia Mutikani for Reuters.
Some observers, though, argue that investors should keep expectations within reason as the average strategist projects U.S. shares will only gain less than 3% between now and year-end after surging 10.3% since the U.S. election.
The Trump-induced rally has fueled concerns over valuations, with the S&P 500 now trading at 18 times earnings estimates for the next 12 months, compared to the long-term average of 15. Investors are now waiting for the end of the quarter and the start of another earnings season to justify the lofty valuations.
“It’s the end of the quarter and investors are buying whatever little dip that we’ve seen,” Paul Nolte, portfolio manager at Kingsview Asset Management, told Reuters. “The market has been quiet in the past few days and are looking forward to the first-quarter earnings in the absence of any major economic data.”
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