Is the bull market back already (and should you join it)?

Central bankers and economists continue to warn a global recession is possible if inflation is not brought under control and consumers start to curb their post-pandemic spending.The MSCI All Country World Index, which tracks the performance of global sharemarkets, rose 9.5 per cent in the month to August 18, while the technology-heavy Nasdaq Composite firmed 13.9 per cent.

Fuelled by chatter in social media forums such as the notorious WallStreetBets on Reddit , “meme stocks” benefit from the sentiment.Beyond surged almost fivefold in the month to August 17. Cinema chain and Reddit favourite AMC Entertainment’s shares rose 29 per cent. The “return of the meme stock frenzy”,, was not just a US phenomenon. Social media agency Meltwater estimates a third of the BBBY mentions on Reddit recently were from Australian-based users.

While the global market has come back about 10 per cent in the past month, the MSCI ACWI is still down 13.4 per cent year-to-date. The Nasdaq Composite is down 18.2 per cent year-to-date.Whether the recent rally is the bull market’s return or just a dead cat bounce is anyone’s guess, Rasiah adds. That’s why in his view it makes sense for some investors to buy shares at relatively depressed prices.

“While growth stocks remain vulnerable to a broader equity market decline – especially if the US goes into recession – they may not necessarily underperform a lot further.”In other words, we may have seen the bottom . But that doesn’t mean Bassanese thinks investors should blindly load up on equities.

For the tech sector, that meant valuations went from an “expensive” 29.6 times earnings to a more “reasonable” 21 times earnings, which was below the long-term average of 22.1 times. However, following the rally of recent weeks, valuations are back above the long-term average. “I am not chasing the rally and consider the strength in the US consumer like the Australian one is going to fade as the rate hikes affect consumption.”Whether investors choose to do otherwise should depend on their risk tolerance, Ecuyer says – and “whether they can stomach another sell-off”.P [500] were to fall to the June lows, then prices could fall around 20 per cent and some of the stocks that have doubled off the lows may experience the more aggressive selling.

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