U.S. stocks delivered another solid weekly gain, driven by optimism that interest rates may finally be topping out. The weekly gain builds on an impressive rebound for U.S. stocks that began in mid October.
- The S&P 500 (SPY) is up 17% from the 52-week low that happened October 13.
- The tech-heavy NASDAQ 100 (QQQ) is up 15% from the 52-week low.
- The Vanguard Global Stock Market (VT) is up 15% from the 52-week low.
Take a look below at the S&P 500 chart for 2022.
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*Chart from ycharts.
Why are Stocks Rebounding?
The recent rebound in the S&P 500 is more evidence that stocks are bottoming out and the bear market is getting long in the tooth. The rebound is being fueled by a few key developments.
Peak interest rates: This week the Federal Reserve signaled that it will be slowing the pace of interest rate hikes. Bigger picture, interest rates are much closer to the top of this move and most of the pain from that is behind stocks.
Peak inflation: Growing evidence that inflation has finally peaked and is set to normalize in the next 12-24 months.
Bear market ending: The bear market of 2022 began on January 3 and the average bear market last 289 days. History isn’t a perfect indicator, but history says that this bear market should be over soon.
Seasonal trends: October, November, December and January are histrionically strong months of the year for U.S. stocks and we are seeing that unfold this year. October and November were both good months for U.S. stocks.
What Should We Expect Moving Forward?
After this big rebound, stocks look a little over bought in the short run. However, beyond some short-term volatility, I see clear signs that stocks are stabilizing and that has led to the S&P 500 trading well off the 52-week low.
Looking forward we have two potential catalysts in play.December has a history of being a good month for stocks. We also have a shot at getting a Santa Claus Rally.
Stocks have an optimistic tone right now. Let’s see if we can ride that into a strong month to close the year. I’ll be back next week with another updates have a great day!
Disclaimer: This is not investment advice. This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.
