Rally Hats

The search for a bottom continues.  Just as strategists cut their S&P500 targets and warned of an impending recession with the over market already down -17-19% what happened?  The S&P500 put in its best upside week since the pre-2020 Presidential election lows.   With breadth in the market having diverged in a positive manner for about two weeks as the markets probed for a bottom, last week breadth exploded higher with multiple 7 to 1 positive up day on the NYSE. These are characteristics of bull market turns not bear markets.

As we discussed a week ago, pre-rally, the hidden good news behind the scenes was that bond volatility, which led this downturn since late 4th quarter 2021, looked to be peaking. Recall that this “collateral” needs to stabilize before leverage players who borrowed to buy stocks on margin are no longer forced to sell at any price.  Moreover, real-time market inflation expectations continue to head lower. Weaker economic data (the Citi Economic surprise index is now decidedly negative at -40, which historical has been a contrary bullish signal) has led more analysts to discuss a late Summer Federal Reserve pause in its tightening cycle.  This timing has been priced in the forward markets now since last November.

Global equities rallied almost across the board last week, led by the NASDAQ (+6.8%), the Dow (+6.8%), and S&P (+6.6%), as U.S. markets broken their 7-week losing streak.  This occurred as Treasury yields fell, ranging from 13 bps for 2-year notes to a basis point or two at the long end sending interest rates to multi-week lows. Finally, last week, the U.S. dollar weakened to its lowest level in 4 weeks as well as the flight to quality subsided.

One of the few markets in the red was China’s COVID zero policy weighs on the economy. China announced it will continue easing Shanghai’s restrictions this week which gave financial markets some hope on the final Monday of May 2022 while US equity markets were closed. Equity markets across Asia were broadly higher, led by over 2% gains in the Nikkei and the Hang Seng, while the CSI 300 was a up with a 0.7% gain.

 

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 This content contains general information and express the views of Oak Harvest Investment Services. All data, articles, and information cited are believed to be reliable at the time of creation; however, Oak Harvest does not warrant any information contained herein to be correct, complete, accurate or timely.

Oak Harvest provides links to content produced by other websites that OHFG does not control, and Oak Harvest does not necessarily approve or endorse such content and does not guarantee its accuracy. Nothing in this content constitutes personalized investment advice. Any charts, indicators, or graphs included or referenced in this content have limitations, and no such material is able, in and of itself, to provide a buy or sell recommendation for any security. Strategies and ideas discussed may not be right for you, and views and opinions expressed may change without notice. Strategies and ideas discussed will not apply to all client accounts or portfolios.

Nothing in this content constitutes a recommendation, or an offer or solicitation to buy or sell securities. Oak Harvest makes no assurance as to the accuracy of any forecast or projection made. Not all past forecasts or projections have been accurate. No current or future forecasts and projections are guaranteed to be accurate.  And future forecasts may not be as accurate as any forecasts discussed. Indexes like the S&P 500 are not available for direct investment and your results will differ. Past performance is not indicative of future results. Investing involves the risk of loss.

 

 

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Rally Hats
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Rally Hats
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The search for a bottom continues. Just as strategists cut their S&P500 targets and warned of an impending recession with the over market already down -17-19% what happened? The S&P500 put in its best upside week since the pre-2020 Presidential election lows. With breadth in the market having diverged in a positive manner for about two weeks as the markets probed for a bottom, last week breadth exploded higher with multiple 7 to 1 positive up day on the NYSE. These are characteristics of bull market turns not bear markets.
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Oak Harvest Financial Group
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