This week, the three major U.S. stock indexes changed their continuous decline, and U.S. inflation seems to have peaked. Investment banks have speculated that this round of U.S. stocks has come to an end.

For the week, the S&P 500 rose 6.6%, its biggest weekly gain since November 2020, snapping a seven-week losing streak, the longest losing streak since 2001. The Dow rose 6.24% this week, ending the previous eight losing streak, which is also the longest losing streak since 1923. The Nasdaq rose 6.84% this week, ending the previous seven losing streak.

However, it should be noted that although the three major stock indexes have risen sharply this week, the S&P 500, Dow and Nasdaq have fallen by 12.76%, 8.6% and 22.46% respectively since the beginning of the year.

The Bank of America Merrill Lynch Fear Index has entered extreme panic territory.

However, statistics show that since 1950, the S&P 500 has risen by more than 6% in a single week, a total of 25 times. Among them, only 3 months, 6 months and 12 months after 2 times, the probability of increase is more than 70%, and the median of the increase after 3 months, 6 months and one year is 10.8% and 16.6% respectively. and 22.2%.

Obviously, the market has been quietly moving. This week, the net inflow of US stocks exceeded 20 billion US dollars, the largest net inflow in nearly 10 weeks.

JP Morgan said that the buybacks of large companies may reach a record $600 billion in the first half of this year, and the buybacks in the first quarter of this year were already close to $300 billion. , which is a bounce bullet.

Analysts shout, the bottom is solid

JPMorgan global market strategist Marko Kolanovic once again firmly defended the “bottom theory,” saying in his latest letter to clients that U.S. stocks may have finally bottomed.

Marko Kolanovic said it is unnecessary to worry about where the market is to intervene. The more important question to consider is what to buy. “Right now, there are huge opportunities in some segments such as energy, small caps, high beta/cyclical stocks and emerging markets, many of which are at record valuation discounts, while others remain expensive,” he said. , and may underperform, such as the bond agency industry.”

Goldman Sachs said signs that U.S. inflation is at least starting to pull back from 40-year highs could be positive for stocks.

“Indeed, peaking inflation could be helpful, but stocks do need other support too, especially if investors are concerned about a further downturn,” the Goldman team wrote. Key factors needed to boost market momentum include strong The economy, low valuations and falling interest rates. October 1990 was positive on all three fronts, with the S&P 500 gaining 29.1% over the following year.

Stocks will rise as the economy adjusts to inflation, said Thomas Peterffy of Interactive Brokers. The U.S. economy contracted at an annualized rate of 1.5% in the first quarter, stock market valuations fell sharply but remained slightly above their 10-year average, and interest rates were rising, although bond yields were off their highs.

Tom Martin, senior portfolio manager at Globalt Investments, said: “The market’s down pattern is taking a break, the downturn has come a long way, it’s been down very fast, and if we can settle down here, the bottom or near this level.”

Jeff Kilburg, chief investment officer at Sanctuary Wealth, said he sees the U.S. bond market as a “benchmark” for stocks. The 10-year Treasury yield has fallen below 2.75% from a peak of more than 3% this year.

“I don’t think it’s a bear market rally, investors are repositioning. A lot of people were too pessimistic before. Interest rate-wise, when you see U.S. Treasury yields above 3%, it’s not sustainable. When yields When the rate is below 2.75%, the stock market can recover, and that’s all the short-term factors that come back to the stock market.”

Dong Zhongyun, chief economist of AVIC Securities, also believes that the Fed’s most hawkish moment may be over, and the possibility of the United States falling into stagflation in the early 1980s is low.

The direct cause of this round of inflation is the unlimited quantitative easing policy adopted by the Federal Reserve after the epidemic and subsidies from the fiscal authorities, superimposed factors such as the disturbance to the economy caused by the constant mutation of the virus and new geopolitical conflicts, which ultimately pushed inflation upward for four decades. See the level. Although the causes of this round of inflation have many similarities compared to the period of the Great Inflation. But in fact, during the Great Inflation, the reason why inflation turned into stagflation was that, apart from the excessive use of expansionary economic policies by the Federal Reserve and the fiscal authorities for more than a decade, the failure to manage inflation expectations – that is, the de-anchoring of long-term inflation expectations is another an important reason.

During the current round of controlling inflation, the Fed fully realized the importance of expectation management. Judging from the level of inflation expectations implied by the current interest rate, the inflation rate implied by the 5-year/10-year Treasury bond has dropped from the previous period and then leveled off. This means that the Fed has successfully suppressed the market’s long-term and sharply higher inflation expectations.

Inflation is likely to gradually decline in the middle of this year with the Fed’s tightening policy. Judging from the peak of composite inflation expectations and the weakening of economic momentum, the Fed’s most hawkish moment may have passed, and future inflation and economic indicators may gradually weaken the Fed’s hawkish stance.

On Thursday, May 27, data from the U.S. Department of Commerce showed that the U.S. PCE price index increased by 6.3% year-on-year in April, the expected value was 6.2%, and the previous value was 6.6%. It was also the smallest increase for the metric since November 2020.

“Inflation has been high and rising over the past year, and we’re now in a ‘slow down from the high’ phase,” said Tim Quinlan, senior economist at Wells Fargo.

How much is the bear market soaring?

There are also analysts who believe that the bear market is soaring.

Joseph Saluzzi, co-head of equity trading at financial institution Themis Trading LLC, said U.S. stocks entered a buffer period before entering the bear market.

“When the stock market gets to this point, it doesn’t really take much to bounce back. And it’s quick. The problem hasn’t gone away, but we’ve temporarily found a little bit of a middle ground between inflation and recession.”

Zhang Yidong of Industrial Securities also believes that the current “mid-term end” of U.S. stocks may have appeared, and the major indexes are approaching or exceeding the bear market dividing line, and then it is expected to usher in a “breathing” window period that lasts for several months.

But this does not mean that the U.S. stock market will usher in a reversal, and it may continue the trend of falling and falling. “This round of U.S. stock market recession and bear market may be doomed,” he said.

Analysts are also divided on whether the US stock market is rebounding or reversing, because the market as a whole is in a very embarrassing position. Judging from the decline and time of the S&P 500 index, it is currently hovering in a bear market of -20%, and at the same time The decline has been going on for 100 days. At this point, if it can support a direct reversal, it will not enter a bear market, which has happened many times in history.

However, it is also possible to rebound strongly within the range of completely entering the bear market. After all, it has only fallen for 100 days. In the history of several major bear markets, the decline or the duration of the decline is longer than this round. For example, in the bear market of the new crown in 2020, although the S&P 500 index fell for only about 2 months, it once fell as deep as 37%. Another example is the 2008 global financial crisis, when the S&P halved, and also fell for nearly a year.

This article is reprinted from: https://news.futunn.com/post/15975888?src=3&report_type=market&report_id=206841&futusource=news_headline_list
This site is for inclusion only, and the copyright belongs to the original author.