This weekend a year ago the Nasdaq Composite hit a record high. And why not. The Fed Funds rate was then effectively zero, while the central bank continued to buy assets, pumping liquidity into the market. Inflation, Fed chair Jay Powell insisted, was “transitory.”
Where to now? Can the recent rally propelled by indications of cooling inflation be sustained? Well, many traders seem wary about betting on any traditional festive surge, as shown by some funny stuff going on in options markets. Lee, head of research at Fundstrat, in a note published late Thursday reiterates a batch of reasons why stocks can rally from here.
Indeed, the calmer conditions in bond markets of late — as measured by the CBOE 20+Year Treasury Bond Volatility ETF — is also helping support equities. The VXTLT has dropped from 33 to 23 in just four weeks and “this collapse in volatility, in our view, would support S&P 500 surging to 4,400-4,500 before year end,” says Lee.
Finally, Lee challenges the view that investors will turn attention away from monetary policy and start to fret about how much a slowing economy will impact company earnings.
How does Powell still have a job
When others zig, you zag. I’ve heard more “experts” expecting a rally between now and year end. Leads me to be very bullish