Dear valued client,
Markets soared this week amid new U.S. inflation figures… down to 8.5% in July from 9.1% a month prior. This indicates a relative cooling of inflationary pressure, and investors reacted with enthusiasm. Markets shot up by 2-3% on Wednesday alone, lead by the NASDAQ (technology company index) which is now in bull market territory, per the WSJ.
A bull market is defined as a market in which share prices are rising, economic conditions are favorable, and investors are optimistically buying pieces of companies – hence the Charging Bull in New York City near Wall Street. The antonym of a bull market is a bear market, where share prices are declining (usually 20% or more, as we saw at one point this year). Some experts claim we have recently entered a bull market, especially in the technology sector.
According to historical performance, the average bear market lasts 1.5 years and declines by 35%. Bull markets, on the other hand, last 8.1 years and appreciate 387%. This is encouraging news for investors across the board.
The Federal Reserve will see August’s economic data before their September meeting. Depending on the numbers they see, I predict they may only raise interest rates by .5 percentage points, as opposed to the .75 percentage points we’ve seen after the past couple of meetings. Inflation might be coming down from its peak, but as anyone who’s heard a pilot say, “We’ve begun our initial descent,” knows it takes quite a while at times to actually land the plane.
“People who exit the stock market to avoid a decline are odds-on favorites to miss the next rally.” – Peter Lynch
Have a terrific weekend,
PW
