Will the Stock Market RALLY Continue Or Will Stocks CRASH AGAIN
The stock market has had a nice run in the last several weeks. And yet, there continue to be several threats in the economy. So will the stock market rally continue or will stocks crash again? This is the question this video attempts to explore.
Towards the tail end of last year, there was a lot of optimism in the market. Granted it may have been fading a little, but things still looked promising. Discussions on the metaverse, NFT’s, and random tokens were rampant in the cryptosphere. And companies with no earnings, or companies that weren’t even real companies but were looking to become companies, i.e. SPACs were all the rage.
Until the tables turned and there was a significant stock market crash.
Economic events such as rising inflation, commodity price inflation, the unexpected war in Europe, China going into lockdown after lockdown resulting in the supply chain not improving, daily talks on the potential of a yield curve inversion, scams in the crypto markets coming to the forefront, startup funding dipping, the fed tightening the fed fund rates, and tech layoffs, all seized up the markets and sent it for a tailspin.
At its worst, the Nasdaq was down over 30% the S&P over 20%. Just a market in freefall, an epic stock market crash.
But then something happened.
Around mid-June, the markets started rallying.
The Nasdaq quickly gained 10%, now only down 20% YTD and the S&P gained 7%, now only down 13% YTD. There were several reasons for the stock market rally.
For example, there are meaningful signs that would suggest that inflation has peaked and while it may remain elevated, it wasn’t going to cross 9% again. Which meant the Fed wouldn’t be so hawkish and wouldn’t crush the economy with rates rising 75bps every single month.
Also, commodity prices started declining, potentially due to lowered demand. Also, there are signs that the economy is contracting. After all, there's been 2 consecutive quarters of negative GDP growth, and the purchasing manager's index dipped below 50 to 47 denoting a contracting economy.
Also, earnings continue to be strong as consumers continue to spend and earnings revisions are also not coming in as expected. All of this has created newfound optimism in the market resulting in this wild rally.
But have things significantly changed?
It's important to analyze the reasons why the stock market was crashing in the first place to assess whether that trend will continue.
A case could certainly be made that this is a bear market rally and that the stock market can crash again fairly easily.
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DISCLAIMER: The opinions expressed in these videos are not meant to be financial advice. Always consult with your financial advisor and do your own due diligence as individual facts and circumstances may vary.
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