Is the Bear Market Rally Shifting in the Stocks Sector?
WHAT YOU SHOULD KNOW
- The analysts at Citigroup believe that the majority of the stock market rally seen this year is already over
- The daily chart of the S&P 500 shows positive growth since the beginning of July 2022
U.S. stocks have regained some of their losses from the bear market rally but have recently fallen again as investors become concerned about interest rate hikes by the Federal Reserve. The analysts at Citigroup believe that the majority of the stock market rally seen this year is already over.
The strategists at Citi Research believe that the current bear-market rally is about average in length. The sentiment has improved as much as it generally does during regular bear-market rallies. This would suggest that the rally might soon come to an end.
They further write, “Bear market rallies are often sentiment-driven, as the market just becomes too bearish. More fundamentally, many bear market rally are driven by hopes that the Fed comes to the rescue. The current one is no different, as the Fed pivot narrative has been an important catalyst.”
The daily chart of the S&P 500 shows positive growth since the beginning of July 2022. It has crossed the previous major point of resistance at the 4175 mark and looks slightly bullish.
The S&P 500 chart.
Federal Reserve officials agreed in July that they needed to raise the interest rate to combat high inflation, but they were concerned that they might tighten the stance of monetary policy by more than necessary. The Federal Open Market Committee’s July 26-27 meeting minutes were released on Wednesday.
The President of Federal Reserve Bank St. Louis James Bullard said he is leaning toward another large rate rise of 75 basis points at the central bank’s September meeting. Meanwhile, according to a Bloomberg report, Richmond Fed President Tom Barkin said the Fed “will do what it takes” to drive inflation back toward its 2% target. Reuters reported that Barkin is saying the Fed’s efforts needn’t be “calamitous.”
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