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Stocks May Be Climbing, But Don’t Get Complacent

The S&P 500 finished 2022 down roughly 20%, flirting with a bear market. It was one of the worst trading years for the index since 2008, and a big difference from 2021 where the S&P 500 rallied nearly 27%.

It’s been a different story, so far, in 2023, with the S&P 500 gaining 6.2% in January, marking its best January in four years. The Nasdaq Composite climbed 10.7% for its best January since 2001 and best monthly performance since July 2022.

A strong start to the year is a positive sign for the market and, potentially, the coming quarters. Of the five times when the S&P 500 gained more than five percent in January after a negative year, the benchmark index rose, on average, 30% for the year.

This may have buoyed investor optimism, but there has to be a reason for stocks to climb that much. And right now, there isn’t any. Investors are hopeful that inflation is coming down, interest rate hikes will pivot, and the U.S. economy will avoid a recession.

Inflation has cooled, but red hot January jobs data in the U.S., which saw the U.S. economy add a whopping 517,000 jobs—more than double the expected 185,000 jobs—shows more work needs to be done to tame inflation. That means more interest rate hikes.

Additional interest rate hikes could tip the U.S. and Canadian economies into recessions, which would certainly undermine already soft corporate earnings.

This is why leading market strategists like David Rosenberg, the former chief North American economist at Merrill Lynch, believes the S&P 500 could bottom out somewhere near 2,900, which is 30% below current levels. He also said investors shouldn’t expect to turn bullish until 2024.

Stocks are certainly rallying, but by all accounts, it’s not the start of a long-term bull market, but just another bear market rally. There just isn’t enough signs of strengthening economic fundamentals to support the bullish sentiment. As a result, the disconnect between the stock market rally and market fundamentals suggests we could indeed see stocks experience a big pull back over the coming months and quarters.  

Learn-To-Trade.com, Canada’s Leader in Stock Market Trading Courses

Stocks kicked off 2023 with one of their best starts in years. Despite the big year-to-date gains and growing optimism, investors shouldn’t get complacent. There’s more reasons for stocks to fall over the coming months than continue to climb. Regardless of what the stock market does, the trading experts at Learn-To-Trade.com can help investors trade more confidently when stocks are going up, down, or sideways.

As Canada’s oldest and leading provider of stock market trading courses, Learn-To-Trade.com has taught investors of every skill level how to profit more consistently. We’ll teach you how to conduct a technical and fundamental analysis, read economic cycles, and spot market trends. You’ll also learn about forex trading, foreign markets, commodities & futures trading, and stock index trading.

At Learn-To-Trade.com, we understand that investors have different needs. That’s why we provide a unique, Lifetime Membership that allows you to re-attend any part of the comprehensive program as often as you’d like. To learn more about Learn-To-Trade.com’s stock market trading course, contact us at 416-510-5560 or by e-mail at info@learn-to-trade.com.

George Karpouzis

George Karpouzis is the co-founder of Learn-to-Trade and has been personally providing education and mentoring to over 3000 members since 1999. George has been trading in the stocks, options, futures and forex markets using technical analysis since 1986. With the help of advancements in trading technology the Learn To Trade program is now accessible worldwide. His background and passion for teaching brings an invaluable asset to our members. George is constantly striving to improve the program content and develop new strategic relationships for the benefit of the members.

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