Market Notebook

by | Aug 14, 2022

Discussion – 

Equity prices, as measured by ticker SPY, closed sharply higher on the week, while bond prices, as measured by ticker BND, ticked marginally higher.

From a technical analysis standpoint, equity prices appear to be trending upward while bond prices appear to be in consolidation.

Regarding Nasdaq bear market statistics, the Nasdaq bear market could be considered complete. As of August 10th, 2022, the NASDAQ composite closed roughly 20% above the June 16th, 2022 low.

The ongoing bear market in the S&P 500 is not yet considered complete. The S&P 500 has not risen 20% from the June 16th, 2022 low.

Whereas the definition of bull and bear markets can be somewhat arbitrary, the terms can be useful in thinking about market participant sentiment and markets generally.

Regarding market participant sentiment, it certainly appears that a “risk on” sentiment has pervaded recently. A “risk on” sentiment is suggested because it appears that a number of speculative equities with little in the way of profitability have moved consistently and, in some cases, sharply higher over the recent term. Additionally, Bitcoin and Ethereum appear to be catching a bid. Such speculative issues typically falter during periods of negative or “risk off” sentiment. Presently, market participants seem to fear missing out on gains more than losing money.

Little appears to have changed regarding the current inflationary environment. Significant inflationary pressures remain present in the real economy even as the Federal Reserve acts to reign in those pressures. Although there are signs that the Federal Reserve’s actions are working, it is not yet clear how long it will have to continue applying the brakes to sufficiently reduce inflationary pressures.

Many market participants recognize the above and, as such, will enter new positions before it becomes clear that the Federal Reserve will pivot its policy stance. Market participants have likely been attempting to position themselves ahead of the Federal Reserve pivot even though that pivot may not occur for up to 18 months. To a certain degree, recent price gains in equities reflect this concept.

During the coming week and primarily based on technical analysis, the doors remain open for equity and bond purchases within portfolios should purchases be required.

Generally speaking, there appear to be a number of individual instruments whose prices look attractive given the current environment. For those wishing to add to portfolios, happy hunting.

All the best during the week ahead!

Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.