Our Fundamental Stock Market Indicator continues to meander around the recent cyclical high. It’s been doing so since initial unemployment claims rose back above 400,000 during the week of April 9 and the CRB raw industrials spot price index peaked on April 12. Jobless claims should drop back below 400,000 during July or August as the auto industry ramps up production. In addition, the pace of payroll cuts among state and local governments should slow now that they’ve cut their costs to balance their budgets for the new fiscal year that starts July 1.
We have been monitoring the performance of the S&P 500 this year, which is the third year of the Presidential Cycle, relative to the previous 15 comparable years of this political cycle. So far, it is most closely tracking the Harry Truman market of 1951. If it continues to do so, then the S&P 500 should be up to 1410 by the end of August and to 1465 by the end of the year. That would make it a gain of 16.5% for the year, slightly underperforming the average third-year gain of 18.3% since 1951.