The above question must be in the minds of lot of traders. Esp. looking at the news flow. All we keep on hearing currently is : Inflation, war, rate hikes, recession to name a few and all of these are of course negative for stocks.
The below article tackles this question in a unique way and I tend to agree with this analysis.
Here’s some excerpt(s) from the article :
Why did the stock market bounce this summer?
Everyone has their explanation: The Fed might pivot! Inflation readings have now peaked! Oil prices are down 25%! China is ending the lockdowns! The labor market is staying strong! Earnings are still coming in better than expected!
So here’s my explanation, and, if you fancy yourself an intellectual or you’ve spent years at a fancy school, you will definitely hate it: The money has to go somewhere.
Premise of the writer
The stock and bond markets, in combination, form an equilibrium, absent severe changes in the money supply or the overarching needs of the investing public. There is stasis.
200+ year chart on how 60-40 Stock bond portfolio fared in the first half of the year
2022’s volatility has been incredibly unique for this era – we haven’t seen a plus 20% or minus 10% year for the 60/40 stock-bond portfolio since 1975 up until now.
2022’s first half was the second-worst for a 60/40 portfolio of stocks and bonds in over two centuries. Centuries . I’ll let that sink in for a moment. The researchers note that In 79% of years going back to 1800, a 60/40 portfolio was positive through to June. This year’s first half featured the worst 60/40 performance since 1932 and there were very few other years that have ever even come close.
What happened after such a big half yearly fall ?
Read this one out