Less than 20 months after it began, the bear market that engulfed the S&P 500 during the pandemic is a mere 260 points from being completely erased. The Dow Jones average eked out a gain to notch its 10th straight winning session on Friday, its longest streak in nearly six years, and showing how the rally is broadening from a few chip makers and high-flying tech firms into other areas of the economy such as healthcare, energy and banking. Should the optimism persist, last year’s bear market has a shot at being unwound faster than all but three of its predecessors since World War II.

Following a much celebrated June pause in the year long battle to squash inflation, Fed Chair Jerome Powell is expected to resume hiking rates next week. But his famous predecessor, Ben Bernake – the veteran of the 2008 financial crisis, says it may be the last. Closing the book on the Fed’s landmark tightening campaign is emblematic of a growing belief in a soft landing for the US economy – unemployment remains at half century lows as inflation cools.

Future Wealth’s View

It is hard to believe that the stock market is still staying bullish after a week of, at best, mixed earnings from companies. Here is a recap of the major companies that reported Q2 results this week – .Goldman Sachs missed on the bottom line, Netflix missed its revenue numbers, Tesla failed to increase its full year deliveries number and TSMC lowered revenue guidance for Q3 signaling a weakening of the semiconductor industry. Next week, we have Microsoft, Alphabet, Amazon, and Meta Platforms set to report earnings.

It is all but certain that the Fed will increase interest rates by 25 bps next week and with the kind of week we have had where earnings and revenues for future quarters are being cut, the market may be getting a bit ahead of itself. But, the FOMO (Fear of Missing Out) effect is now in full force and that could keep the market drifting higher. Our recommendation for investors is to not chase the expensive tech stocks and instead look for undervalued stocks in sectors such as staples and healthcare that are just beginning to participate in the rally.