Traders work on the floor of the NYSE in New York.
NEW YORK - Investors are assessing a recent US stock market bounce after similar rallies ended in 2022, a year that is on track for the biggest S&P 500 percentage drop in the first half of a year in over a half century.
The S&P 500 jumped 6.4% last week, but it is hard to blame investors for being skeptical: the benchmark index has seen three other such rebounds of at least 6% already this year, only for it to fall below its previous low point.
The rally has eroded as the weak consumer confidence data contributed to a 2% decline for the S&P 500 on Tuesday. The index closed down over 20% from its January record peak, and is down about that much for the year.
After the brutal declines this year, many believe that stocks are ripe for a snapback.
Michael Wilson, Morgan Stanley strategist, said earlier this week that the rally could extend as much as 7% from recent levels, but he described any near-term gains as nothing more than a bear market bounce. He sees fair value price levels for the S&P 500, which closed at 3,821. A recession would bring down tactical price lows to about 3,000, while 55 was at 3,400 -- 3,500 on Tuesday.
The bear market is likely not over, although it may feel like it over the next few weeks as markets take lower rates as a sign that the Fed can orchestrate a soft landing and prevent a meaningful revision of earnings forecasts, Wilson wrote in a note.
Jonathan Krinsky, chief market technician at BTIG, said he expects the S&P 500's countertrend rally to rise to the 4,000 -- 4,100 level at the end of the quarter before falling below 3,500 in the third quarter. Some investors are more optimistic about equities.
Jack DeGan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire, said he has been adding equity exposure to his clients' portfolios.
DeGan doubts that the economy is heading for a recession within the next 18 -- 24 months and that inflation will be moderate by the fall, noting the recent drop in prices of commodities such as copper and lumber.
If my understanding of how the economy is unfolding is correct, then I think we have seen the low, DeGan said. I am pretty confident that I am putting money to work, so I guess that tells you that I am pretty confident. The S&P 500 has produced a median return of 2.15% over the past 20 years, according to Bespoke Investment Group. That's the best return for a two week period of the year.
There's not much for investors to get excited about when it comes to the equity market these days, but the calendar is starting to work in the market's favor, according to Bespoke in a note this week.