‘A different animal’: The bear market is ‘over,’ but that doesn’t unleash bulls to send stocks on a 2023 tear, according to Wells Fargo

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The bear market is finished as U.S. stocks climb in 2023, yet the upside is limited, according to Wells Fargo & Co.

“The bear market is over, but it is not the great reflation,” said Wells Fargo equity analysts led by Christopher Harvey in a research note Monday. “We see neither a bull nor a bear market, just a market.”“The bear market is over, but it is not the great reflation,” said Wells Fargo equity analysts led by Christopher Harvey in a research note Monday. “We see neither a bull nor a bear market, just a market.

“The rally in risk has spurred early cyclicals and risk-on, but valuations say this is neither” March 2009 nor April 2020, the analysts said. The months they cited correspond to the U.S. stock market’s bottom during the 2008-2009 global financial crisis, and the start of its sharp recovery from the COVID-19 crisis of 2020.

One camp of investors thinks last year’s stock-market selloff was “predominantly driven by fundamentals and secondarily driven by the rising cost of capital” as the Federal Reserve rapidly raised interest rates to combat high inflation, according to the Well Fargo report. “The second camp views rates as the primary factor .”

Bull ‘stuck in traffic’ The Fed has been trying to engineer a so-called soft-landing for the U.S. economy despite fears that its aggressive rate hikes could lead to a recession. While the central bank has slowed the pace of its rate increases amid signs of easing inflation, Fed officials also keep warning that its job battling high inflation is unfinished.

 

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