The stock market has been locked in a lackluster phase ever since the start of the year. And the few-and-far-between upsides have proved to be bear market rallies and not those signaling a sustainable uptrend.
What Happened: Against this backdrop, a prominent Tesla Inc. TSLA analyst said a reversal is contingent on the materialization of three events — a Fed pause, resolution of the Russia-Ukraine war and China ending its lockdowns.
Three factors could set off a bull market rally, said Ross Berger, co-founder and CEO of Gerber Kawasaki Wealth and Investment Management.
If these materialize, investors can brace for a much higher stock market in 2023, he added.
Thus far this year, the SPDR S&P 500 ETF Trust, an exchange-traded funded reflecting the performance of the broader S&P 500 Index, is down about 14.3%.
Why It’s Important: The U.S. Federal Reserve has raised its Fed funds target rate by a cumulative 3.75% points in a span of eight months in the current tightening cycle. This has impacted the housing market, given that mortgage rates are benchmarked against the Fed’s policy rate.
The Fed’s rationale is that the inflationary pressure is perking up, and unless it is nipped off in the bud, it can have a deleterious impact on the economy. That said, the October inflation report showed evidence of easing pricing pressure. The minutes of the November Federal Open Market Committee meeting signaled a thawing in the Fed's hawkish stance. Commenting on the minutes, LPL Financial’s chief economist Jeffrey Roach said as inflation looks on track to cool in 2023, the Fed will likely be forced to slow down the pace of rate hikes.
The Russia-Ukraine war has impacted the global order. Input prices and energy prices have shot up amid supply concerns. Several corporations have pulled out of Russia in protest against the nation's hegemonic stance, which in turn has impacted their financials. Western nations are now bracing for the conflict to go on for years.
The COVID-19 lockdowns in China, meanwhile, have impacted the production of the suppliers of major tech companies. A case in point is the fate of Apple Inc. AAPL. Analysts see a big impact on the holiday sales of the company, as a major iPhone factory of its supplier Hon Hai Precision Manufacturing Company Limited HNHPF is operating under severe constraints under the most recent lockdowns.
Price Action: The SPY closed Wednesday's session up 0.63% at $402.42, according to Benzinga Pro data.
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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