Q3 2022: Has the US market bottomed?

S&P 500 bounce

The US stock market had a strong turnaround after the CPI inflation report on October 13. To start off -2.5% and end up nearly +2.63% indicates overwhelming buy support and bullish sentiment at these levels.

Inflation Fears Averted

Despite year over year inflation coming in higher than expected at 8.2% instead of 8.1% the trend continues to support the idea inflation has peaked. The initial scare of a higher than forecasted was likely why the stock market initially dropped on Oct 13. If inflation has peaked it fuels the hope for an eventual federal reserve interest rate pivot, and the signal for the next bull market.

Lagging indicators

The worst part of economic recessions historically come after the stock market has already hit its lows for the bear market. Waiting for the worst news to come tends to result in you missing plenty of percentage points of gains in the stock market.

Conclusion:

A further drop below 3500 would likely require a lot of negative news from very poor fiscal reports to global supply chain problems, or the worst information: sticky inflation. For a passive investor though the dip to the 3600-3700 range should be welcome to average down for the long term future. The US hegemony of the financial markets is not going to be taken down by transitory(?) inflation and you should feel confident buying.

Three Canadian tickers that track the S&P 500 index mentioned above: HXS.to, VFV.to, VSP.to