Bear markets always include fierce “bear-market rallies”
... when it appears that all the selling is over and that it’s safe to take risks once more.
They’re great ways to lure people in to losing more money. There’s a good chance that this will prove to be another one.
The bond market seems to be positioned for a world in which the Fed brings down interest rates soon, while inflation also comes swiftly under control, all without damaging corporate returns enough to dent the stock market.
Powell set a high bar for altering policy (he wants “compelling” evidence that inflation will come all the way back down to 2%)
... while explicitly leaving open the possibility of another 75 basis-points hike in September.
John Authers Bloomberg 1 augusti 2022
Is this a bear market rally, or has the market turned a corner?
Between the start of the year and June 16, the S&P 500 fell 23 per cent. Since then, the market has clawed back a healthy chunk of those losses. The index is now down only 13 per cent from its peak.
If the rally is going to stick, then, the market has to be right about inflation. That is a necessary rather than a sufficient condition, however.
The market must also be right that we will have either a shallow recession or no recession at all next year.
Robert Armstrong FT 1 August 2022
Federal Reserve Bank of Minneapolis President Neel Kashkari said that the central bank is still committed to its goal of 2% inflation.
Inflation is “higher than we expect. And it’s not just a few categories. It’s spreading out more broadly across the economy.”
MarketWatch 31 July 2022
Lagarde: "We will raise interest rates for as long as it takes to bring inflation back to our target,"
https://englundmacro.blogspot.com/2022/07/lagarde-we-will-raise-interest-rates.html
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