Stocks have been on a roll in June, delivering an impressive string of gains in the last few weeks.
In the last month, the S&P 500 (SPY) is up 4% and the tech-heavy NASDAQ 100 (QQQ) is up 8%.
With more gains in hand, stocks are having a great year. The S&P 500 is up 13% on the year and the NASDAQ 100 is up 37%, its largest gain ever in the first half of the year. Take a look at the chart below.
Why Are Stocks Rallying?
I see two primary factors driving stocks higher right now.
Rebound from a bear market: US stocks had a bad year in 2022, with the S&P 500 declining as much as 28% from the 52-week high and the NASDAQ falling as much as 45% from the 52-week high. Bear markets don’t last forever and this is a nice rebound out of the recent bear market in 2022.
Inflation is getting better: Consumers are still feeling the pinch with food and energy, but the official inflation data is getting better. Here’s more data from NBC News.
The Bureau of Labor Statistics reported Tuesday that the inflation rate fell to 4%, the lowest level it has reached since March 2021 when the inflationary spike began.
What Should We Expect Moving Forward?
In the short run stocks look over bought – particularly the tech-heavy NASDAQ. When stocks are over bought, it usually leads to some sort of minor correction and that’s what I am expecting here. I wouldn’t be surprised to see the S&P 500 with a 2%-4% pullback in the next few weeks.
However, beyond a potential short-term correction I remain optimistic on stocks. I am expecting more gains in the second half of the year. And I see lots of studies online that show when stocks have a good first half of the year, it almost always leads to more gains in the second half of the year.
Here is a cool study I found on Twitter.
The bottom Line: After a tough year in 2022, stocks are on the rebound in 2023. Looking forward I am expecting more gains. I view any weakness in stocks as an opportunity to buy low and add cash to the market.
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.
