The Bull is Back?

Equity markets gained slightly last week. The post-FOMC rally carried over, but eventually ran into the reality of continued tightening. The S&P 500 added 0.4%. The S&P is up 14% from June 16th June low. However, it was a deep hole to begin the year and it’s still down 13% for the year. With “real interest rates” having peaked on June 16th, many growth at any price stocks have led the gains and other down and out stocks have staged an impressive summer rallies. Netflix, for instance, is up 30% this quarter as investors have embraced its turnaround plan.
Consumer discretionary, technology and telecom services posted modest gains. Short cyclestocks, such as energy and materials have been hammered. WTI oil prices have dropped below$88. Commodity and oil price weakness helps the inflation backdrop immensely, and nonenergy stocks have rallied on any price declines.
Tech stocks had the largest percentage gain last week, up 1.9%. Other strong sectors included advances of 1.2% each in the consumer discretionary and communication services sectors.
On the downside, the energy group weighed with a 6.8% tumble, followed by declines of 1.3% each in real estate and materials. Health care and financials were also in the red.
After 18 months, the Senate passed the Inflation Reduction Act (IRA) (a re-branded version of “Build Back Better”). This is a political win for President Biden’s economic agenda. The IRA brings changes to taxes and healthcare and ramps up the fight against climate change with the country’s largest ever federal investment in clean energy. Tax and spend is the continuing theme in political circles, but it doesn’t help slower growth economies and inflation. Consumer sentiment is at historic lows. A recent poll found 87% of Americans believe the country is on the wrong track. One of the worst readings ever registered.
Weekly Stock Podcast: S&P500 Are the Lows in?

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