All three major stock market indexes booked small gains for the week, as investors await next week’s inflation data and policy decisions on interest rates from the U.S. Federal Reserve. Markets currently are forecasting a 71% probability that the Fed will pause on its string of rate hikes. The S&P 500 exited bear-market territory during the week by closing 20% above last year’s October lows, and gained 0.4% for its fourth consecutive positive week. The Nasdaq eked out a 0.1% advance, which was good enough for its seventh straight winning week, its longest streak since 2019, and the Dow Jones finished up 0.3%, booking back-to-back weekly gains.

Going into the year, recession talk had been everywhere, though much of the hard landing fears have failed  to materialize. The economy may be cooling down just enough, and despite the uncertainty out there, inflation remains far from its peak last summer and jobs numbers continuously surprise to the upside. A debt ceiling showdown has also been moved off the table, while things are looking brighter at the Federal Reserve in terms of less-restrictive monetary policy.

Is it time to celebrate the end of the bear market?

Future Wealth’s View

The biggest knock on the recent rally has been that it has been led solely by the mega caps – NVidia, Microsoft, Meta etc. But, this week saw the rally broaden into small caps and mid caps. This combined with the fact that Wall Street’s fear gauge – the VIX, closed at its lowest level in more than three years on Friday, suggests to us that the stock market has entered a new regime of low volatility following the bear market of 2022. A new bull market starts when an index surges 20% from the lowest close of its bear market. The Nasdaq 100 already entered its bull market at the end of March. And the S&P 500 entered the bull market phase this week.

Last week, in our report, we had stated that it is time to begin the rotation from value to growth and we believe, while we may still have a few surprises on the down side, our overarching thesis is to become more bullish in investments in our client portfolios for the 2nd half of 2023 and into 2024.

Amidst all the positive news from the market, Donald Trump became the first US President to be indicted on federal criminal charges. He was a disgrace before he became President, was an embarrassment while in office and he could soon be cellmates with Steve Bannon at Rikers Island Prison.

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