But investors now need to be careful.
Yes, some are hoping that inflation pressures are peaking and that the Federal Reserve will no longer need to raise interest rates as aggressively. Recession worries haven’t gone away, though. Some strategists fear the recent rebound has been a classic knee-jerk reaction.
“This isn’t the time to be a hero. The market rally has been overdue and welcome, but it’s too early to give an all-clear,” said Leo Grohowski, chief investment officer with BNY Mellon Wealth Management.
By way of one example, Grohowski said he’s neutral on tech stocks following their big move since July. Instead, he still likes consumer staples stocks (i.e. food and beverage companies) since they tend to hold up better in the event of a recession.
Other analysts are raising the alarm bells, highlighting that stocks have moved dramatically in such a short period of time.
“The market pendulum has aggressively shifted from pessimistic to optimistic over the past two months,” said Mark Hackett, chief of investment research with Nationwide, in a recent report. “Much of the decline and recovery were driven by investor emotion, which will likely keep volatility elevated until the macro picture becomes clearer.”
“Hopes for a Fed pivot are premature,” Grohowski said. “Inflation will be sticky and stubborn.”
Other market experts think investors should look for quality companies trading at reasonable prices instead of trying to make a bold call on the broader market.