The stock market began last week with new lows for the current pullback but ended the week higher on the back of a very strong jobs report.
The market reversal occurred on Friday, following the release of the jobs report, with the stock market beginning the day down by over one percent and ending the day up by more than one percent. I believe this event was the result of a strong shift in investor sentiment that could mark the low of this pullback. The jobs report was way above expectations and initially led to selling, for fear that the Fed will continue to raise interest rates in the wake of a strong economy (good news is often perceived as bad news by investors). I believe this was quickly followed by a realization that this is actually good news, and the economy is holding up well even in the face of 18 months of rate hikes.
This week there will be two important inflation reports to test investor resolve, and next week is the start of third quarter earnings season which is a big market mover. I continue to believe the stock market will rally in the next few months and produce above average annual returns.
Photograph by: Cristina Gottardi on Unsplash
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