5 reasons equities rallying. Expanding breadth affirms 2022 “bottom” is in. P/E can expand with Fed hikes, as long as “shocks” are avoided. 2H rally.

We are starting to see strengthening internals for equity markets, including key leadership improvements from Technology ($QQQ) and small-caps ($IWM) and measures such as advance/decline lines. Thus, from the perspective of our Head of Technical Strategy, Mark Newton, this is the healthiest expansion of participation all year, and a key reason he believes the “bottom” for 2022 is in.

  • skepticism of this rally is rampant, not surprisingly
  • the plurality of our clients call this a “bear market” rally and doomed to fail
  • investors are waiting for 3 things:
  • retail to capitulate
  • EPS to get downgraded 20% or more
  • Fed to capitulate
  • In the absence of the 3 above, investors remain skeptical

5 reasons equities rally despite skepticism

The S&P 500 has closed at the highest level since June and is nearing 4,000. This is an important psychological level, as it puts the market closer to its all-time high than the 3,000 downside that many investors are “waiting for.”

But why are equities rallying? We can cite a few factors:

inflation risks are abating as gasoline tanks, food prices ease (see below)2Q2022 EPS results are better than feared with 70% beating on EPSmany companies are reporting easing of “supply chains” meaning supply-chain inflationary pressures abating s...

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