The stock market once again posted large gains last week with the help of a key inflation report which showed that inflation cooled slightly in July. Most investors are now asking whether this rally will reverse, take a pause, or continue upwards.
A pause in the rally would be completely normal since the market has climbed considerably and quickly, with the S&P 500 up 8% from its June lows. I think it is unlikely that the market will drop to new lows, in part because so many investors are talking about this possibility and the more a stock market event is anticipated the less likely it is to occur. I believe a modest drop, the S&P 500 returning to the 4000 level and the Nasdaq down to 12000, would be healthy for the market and present another great buying opportunity.
Over the next couple of weeks there won’t be a slew of critical economic data released but the minutes to the July Fed meeting come out on Wednesday and the Jackson Hole Economic Policy Symposium occurs the following week. The symposium brings together central bankers, economist, and academics to discuss monetary policy with a speech by Jerome Powell as the feature. Either of these events have the ability to move the stock market and I’ll be closely watching them.
Drop me a note here to further discuss these potential market moves and your portfolio.
Photograph by: Marianne Bos
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