The Economic Data Suggesting a Stock Market Rally

First, some personal recollections on Her Majesty the Queen

In light of the sad news of the passing of Her Majesty the Queen, I hope my article on finance is seen as a distraction.

I had the privilege of meeting their Majesties the Queen and the now King. For the Queen, it was about a decade ago at Buckingham at a reception before the State visit of the President of India. (India has both a President and Prime Minister).

I was approached by an equerry who in one of the rooms which the Queen was anticipated to stroll through to greet guests, said if you wait here then the Queen will be walking through and you will get to meet her.

Others around me caught on and a line soon formed. She walked to us and asked what I do. I explained I look for technology companies to bring to the UK. She informed me that she just spoke ‘to that lovely man, Mr Tata, and I do hope Jaguar Land Rover remains in the UK – you know supply chains are very difficult to restart once they close I informed him.”

Her insight and intervention in the issue of the day at the time was extraordinary. And I have no doubt to an anglophile like Ratan Tata it made a huge difference to the investment remaining in the UK. No one, no politician, no economist could have lobbied for Britain as she was able.

Now we move on, for King and Country!

Back to the Markets

The Ukraine war and China’s lockdowns had devastating consequences on the global economy. Thus, the new year brought with it one of the worst starts for the stock market in history. Skyrocketing gas prices and inflation kept many on the edge of their seats, fearing a recession.

Wall Street Stocks Rise and Treasuries Recover from Early Declines

Then suddenly, a pleasant surprise and the market took an abrupt turn. The S&P 500 rose quickly, rebounding over 17%. Government bonds rallied, and Nasdaq tech stocks jumped 20%, making it a leading sector. The rise in stock markets started an unexpected rally. The US stock market rally gives investors optimism that the worst of the interest rate hikes is over. There was a collective sigh of relief, hoping the country was past rising rates and inflation.

Experts Advise Investors to Remain Tactically Cautious 

Despite the stock market rally, Bank of America analysts warn prices are still too high. They urge everyone to remain “tactically cautious.” A recent MLIV Pulse survey shows stocks and bonds will likely fall again. Federal Reserve Chairman Jerome Powell recently expressed that rate hikes will continue until prices stabilize. He said history warns against loosening Fed policy too soon. “In an earlier statement, Powell said the Feds would slow the pace of hikes at some point.” After his comments, the stock markets dipped, and the Dow Jones plummeted by over 600 points.

Invest in the Stock Market but Remain Prudent

Firms using statistical trading models unwind bearish positions, and Quant funds support the rally by upping stock bets. Many investors assert inflation is peeking and point to factors driving the stock market recovery. One investor sentiment survey shows the bear-market rallies near peak level. It could be an indicator that stock prices will rise. 

Analysts say it’s a good time to invest and great for newcomers to enter the market. According to Investor’s Business Daily, new IBD users should get familiar with its stock trading system. Learning to recognize chart patterns is a vital element of the investment guidelines. Investors should be wary of short-term volatility and remember speed isn’t unnecessary. Just keep going.

Stocks May Soar Before Collapsing

The stock markets rallied in recent months, making investors hopeful that stocks bottomed out and the worst is over. Still, a growing number of analysts warn that the average bear rally is 289 days, and it’s running out of steam. Everyone should expect to see new lows. In addition, fears of continuing interest rate hikes caused Wall Street’s ‘fear gauge’ to soar.

Some traders shrug off the stock market rally, calling it misguided euphoria, and experts warn of stalling as the Dow falls over 600 points. The chief market strategist at JonesTrading asserted the recent rally isn’t sustainable. According to him, investors should expect volatile highs and lows for the rest of the year. 


For the risk averse, they will sit on the sidelines. But you’re not reading this and risk-averse. For the rest of us, it’s a stock pickers market more than ever and time for extra diligence more than ever.

Alpesh Patel OBE