Investors are starting to believe the worst might have passed. But stocks are still not cheap and risks remain.
, rightly says bears are the worst people to listen to when markets have sold off, just as bulls think the good times will keep going when markets are high.The Fed still has plenty of work to do on inflation. The market sees US rates getting to about 3 per cent and then falling as the central bank tries to support a weakening economy. But if inflation remains sticky – which it clearly has for 18 months – then the Fed may need to go much harder.
. Further, profit margins are still close to all-time highs despite the factors that have boosted them in the last decade – falling rates, cheap labour offshore, falling tax rates, uncomplicated supply chains – all reversing. Dead cat bounces happen frequently in real bear markets. From March 2000 to April 2002, the Nasdaq lost 78 per cent. But during that time stocks rallied more than 10 per cent on 11 occasions, with one rally adding 45 per cent across 15 weeks.
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