August 8, 2022

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Is this a bear market trap or a stock market bottom?

2 min read

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Today’s newsletter is by Brian Sozzi, an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

Monday, June 27, 2022

I am rather amazed by the powerful effects of taking my first day off in about four years last week.

What’s left is a (mostly) clear head with physical batteries that are more charged up than a used Tesla. Maybe I will try doing this more often.

And being semi-off (see below…) allowed me to look at the markets with fresh perspective after a series of downbeat Morning Brief newsletters from yours truly in recent weeks.

I liked how stocks shrugged off hawkish comments from Fed chief Jerome Powell. I liked how stocks turned a blind eye to a worrying outlook on the economy by Federal Reserve Bank of Philadelphia President Patrick Harker in an interview with our Brian Cheung.

U.S. Federal Reserve Board Chair Jerome Powell testifies before a House Financial Services Committee hearing in Washington, U.S., June 23, 2022. REUTERS/Mary F. Calvert

Markets headliner Mohamed El-Erian told Yahoo Finance Live on Friday that “unfortunately, [it’s] uncomfortably possible that the Fed is going to slam on the brakes and push us into recession.”

The S&P 500 ended Friday’s session up 3%, while the Dow Jones Industrial Average tacked on 2.7%.

All of this action suggests markets may have hit some form of short-term bottom.

Notice I said “suggests,” “may,” and “short-term.” I do believe we are mired in a land of bear market rallies until (1) the Fed signals it’s inclined to start cutting interest rates; and (2) inflation increases (CPI, PPI, gas, etc.) begin to decelerate for more than one month.

And it appears others in the world of finance are beginning to warm to the idea that a short-term bottom in stocks maybe be forming.

“The past week+ has seen ‘capitulation’ across currencies, fixed…

2022-06-27 06:00:39

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