Stock Market Rallies

More proof that elections and politics don’t matter as much to the markets as politicians and pundits would have you believe, the Dow Jones rallied to its best one-day gain since 2000. The Dow ended up over 1,200 points, or 3.7% in one day not because anyone did or did not win this week’s elections, but because the latest inflation numbers came in at 7.7% year over year. The latest inflation figures suggest that price increases may be slowing, and the Fed’s work may be done.

Job Cuts

For some additional inflation news, remember that various tech companies have announced tens of thousands of layoffs. That takes some of the pep out of the job market as well. Higher interest rates, harder to find jobs, and less leverage getting raises at existing jobs all spell a dramatic decrease in consumer spending heading into the all-important holiday season.

Stock Market 2022 and 2023

Where does that leave the markets for the rest of 2022 and into 2023?

Barring in new bad news or terrible numbers, Wall Street loves a good Santa Claus Rally. However, gains may be tempered by end of year selling as investors look to lock in some capital losses to offset any capital gains earned this year.

As always, a well-diversified portfolio tailored to your goals and risk tolerance is the best way to invest for the long term. If today’s monster rally shows us anything it is that being out of the market at the wrong time, even for a short while can eat into otherwise solid returns.

End of year festivities aside, the market may not be ready to rally from here. While some numbers can claim an economic recession, this would be the softest of soft landings ever achieved if the economy and the market were to simply turn around and head back up from here. Chances are, this is not a sustained rally.

Here in Colorado, we joke about the changing of the seasons, although this year has been pretty much textbook in the transition from summer to fall, we usually have our share of fake outs. An absurdly early snowstorm, a few weeks of frigid weather followed by two weeks of beautiful blue skies and 70-degree days. This rally feels a bit like 2nd Summer, Winter (a recession) is still likely coming. If you prefer, this might be some Rule 8 action.

Stock Market Rallies 2
If a recession is Winter, are we ready for Spring, or was this just 2nd summer?

Author

By Brian Nelson – Brian is a former Certified Financial Planner and financial advisor. He writes about finance and investing for several financial publications. The material provided on this website is for informational use only and is not intended as investment advice. At the time of publication, Mr. Nelson did not own any securities mentioned, however, that may change at any time without notice. ArcticLlama, LLC, FinanceGourmet.com, and Brian Nelson assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please note material may not be updated regularly and that some information may not be current. Consult with your own financial professional when making decisions regarding your financial or investment options.

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