Last week capped off another week of strong stock market gains due in large part to inflation reports that came in lower than expected and a sense that the Federal Reserve is getting the economy under control. It was also the end of a respectable 3rd quarter earnings season which was good enough to support stock market valuations.
The stock market has zoomed off the lows of October 27th and is now less than 2% below the July highs, and within 7% of all-time highs. This typical strong performance after the market bottoms is why I encourage people to invest excess cash when the market is down. It’s always challenging to buy exactly at the bottom but investing at different price levels while the market is down will often lead to good results.
Many analysts had dire forecasts for stock performance in 2023 and I believe this rally is in part due to performance chasing by many investors who were sitting on the sidelines for most of the year. Buying into a good rally at the end of the year has the psychological effect of making an investor feel like they didn’t miss out on the year’s rally. This could be one of the underlying reasons for the often highly anticipated Santa Claus Rally of mid-December into early January.
We’ll look forward to seeing Santa Claus next month but for now we’re wishing you a wonderful Thanksgiving week!
Photograph by: Simon Maage on Unsplash
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