The beaten-down stock averages are dusting themselves off with the Nasdaq Composite entering a fresh bull market, while the Dow Jones Industrial Average exited its recent correction.
"If inflation continues to drop, the bull-steepening trade will gain further momentum. The Nasdaq has just rallied 20% in 55 days, which is making a lot of traders abandon the idea that this is a bear market rally" wrote Edward Moya, senior market analyst, The Americas OANDA. Bank of America’s institutional clients continued to pile into tech and communication stocks with inflows hitting the most on record last week, $3.
Despite July’s consumer price index pullback, several economists, including former Treasury Secretary Larry Summers, continue to sound the alarm on inflation. "I still think we have a very serious inflation problem in this country. I don't think that inflation problem is going to go away of its own volition. And so I think we're likely to have some quite turbulent times ahead," he said during an interview on MSNBC following the report.
Despite the gains, the Nasdaq is still off about 20% from its all-time high of 16,057.44 reached in November 2021. "We see risk that tech may not prove to be as defensive as some investors expect; Nasdaq earnings revisions have continued to lag S&P 500 earnings revisions" Carey’s team cautioned.
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