Did you enjoy last week’s stock market bounce? The S&P 500 has gained around 5% this month, giving investors a much-needed reprieve from this year’s volatility and stirring hopes that the bear market has finally reached a bottom, but has it?
Experts aren’t being shy about giving their opinions. According to economist and portfolio strategist at New York Life Investments Lauren Goodwin, “I expect we will continue to see market volatility until investors have seen more convincing evidence that this period of Fed hawkishness is behind us.”
Economist at Capital Economics James Reilly thinks this month’s rebound has been driven by investors treating bad news for the economy as good news for equities. His idea is that a struggling economy will cause the Federal Reserve to slow down its interest rate increases, which would take some pressure off equity prices.
Why it matters
Last week gave us plenty of indications that the economy is indeed cooling off. The U.S. services purchasing managers index fell to a 2-year low of 47 this month from 51.6 in June, while weekly jobless claims rose to their highest levels since last November.