Optimism is seeping back into the US stock market as some investors grow more convinced that the economy may avoid a severe downturn even as it copes with high inflation.
The benchmark S&P 500 has rebounded about 15% since mid-June, halving its year-to-date loss, and the tech-heavy Nasdaq Composite is up 20% over that time.
Many of the so-called meme stocks that had been pummeled in the first half of the year have come screaming back, while the Cboe Volatility Index, known as Wall Street’s fear gauge, stands near a four-month low. In the past week, bullish sentiment reached its highest level since March, according to a survey from the American Association of Individual Investors.
Earlier this year, that gauge tumbled to its lowest in nearly 30 years, when stocks swooned on worries over how the Federal Reserve’s monetary tightening would hit the economy.
“We have experienced a fair amount of pain, but the perspective in how people are trading has turned violently towards a glass half full versus a glass half empty,” said Mark Hackett, Nationwide’s Chief of Investment Research.
Data over the last two weeks bolstered hopes that the Fed can achieve a soft landing for the economy.
While last week’s strong jobs report allayed fears of recession, inflation numbers this week showed the largest month-on-month deceleration of consumer price increases since 1973.
The shift in market mood was reflected in data released by BofA Global Research. According to it, tech stocks saw their largest inflows in around two months over the past week, while Treasury Inflation-Protected Securities, which are used to hedge against inflation, notched their fifth straight week of outflows.
Published in The Express Tribune, August 14th, 2022.
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