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Strong market rally with continued buying opportunity.

Strong market rally with continued buying opportunity.

August 02, 2022
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The stock market had another week of large gains as a slew of important economic information gave investors a clearer picture of the current environment. All of the data wasn’t positive, but it was good enough to spark a major rally. Remember that a depressed market only needs less bad news to get buyers back in.

Many of the largest tech companies reported earnings last week and investors were relieved that reports weren’t as bad as they feared. Overall, the reports from companies in the S&P 500 have been a tale of two cities with some companies feeling the effects of the slowdown while others are doing quite well with forecasts for positive 3rd quarter earnings. Overall, the majority of the most influential companies are doing well and that was enough to propel stocks higher.

The other big market driver was the conclusion of the Fed meeting with a 0.75% rate increase. A lot of investors think that the largest hikes are now behind us with moderating future hikes. There also seemed to be a sense that the Fed is on top of things after playing catch up for the last several meetings and this gave investors’ confidence to buy stocks.

In July there was a turning point in the market that was a function of a large amount of important economic data combined with a shift in investor sentiment. By the end of June investors were depressed and exhausted from 6+ months of continuous bad news and the time was ripe for a possible reversal. The economic and earnings reports in July were not great but they showed that we understand the problems at hand and we are working on the repairs.

It will take many months to balance the economy but fortunately the stock market reacts instantaneously to anticipated future events. The market, however, doesn’t generally propel right back up to old highs, and I see any dips in the climb as very good buying opportunities. It doesn’t matter if you are buying on the way down or the way up because either way you are buying at similar price levels. As I’ve discussed previously, the idea of only buying at the absolute bottom is one of the most common psychological mistakes that investors make. If you have excess cash to invest or are ready to open a new account, send me a message now.

Photograph by: Mohammad Bagher Adib Behrooz

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