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2023 Stock Rally Fueled by a Handful of Trading Days
The Impact of Specific Trading Days
According to a recent analysis by DataTrek Research, the massive 2023 stock rally can be attributed to just a few trading days. In fact, nearly all of the S&P 500's 18.1% gain this year can be traced back to 10 specific days. These days have revolved around three main themes: a resilient labor market, gradually declining inflation growth, and the response to the March banking crisis.
Positive Market Internals
The market internals for 2023, with slightly more up days than down days, align with the definition of a bull market. Of the 137 trading days so far, 74 have been positive and 63 have been negative. This suggests that the market is exhibiting bullish characteristics, making it more likely for the rally to continue.
Importance of Tech Earnings
One of the most critical factors fueling the stock rally has been strong tech earnings. Tech and tech-adjacent companies make up 39% of the S&P 500. Therefore, their performance plays a crucial role in driving the overall market. Although meeting expectations in Q2 earnings season is likely, the challenge lies in continuously exceeding these expectations as analysts revise them higher. Positive surprises from tech companies are necessary for the S&P 500 to sustain its upward momentum.
The Role of the Federal Reserve
While a Federal Reserve indicating satisfaction with inflation progress and loosening policy could trigger further rallies, this is more likely to be a story for 2024. Fed officials have consistently expressed concerns about high inflation and have signaled expectations for more rate increases but no cuts before the end of this year. Therefore, the impact of the Federal Reserve on the stock market seems more probable in the future rather than the present.
Remaining Optimistic for Further Gains
Despite the challenges ahead, Nicholas Colas, co-founder of DataTrek Research, remains optimistic about achieving further substantial gains in the stock market. He believes that having a few more up days than down days throughout the rest of the year can lead to continued rallies into year-end. With 113 trading days left in 2023, a positive trend could drive the market and build on the momentum already established.
Conclusion: The Impact of the 2023 Stock Rally on New Businesses
The current 2023 stock rally has been largely driven by a handful of trading days, reflecting a resilient labor market, declining inflation growth, and responses to the March banking crisis. These factors have contributed to a bull market environment with slightly more up days than down days, indicating a positive trend that may continue to benefit the stock market in the coming months.
For new businesses, this stock rally presents both opportunities and potential challenges. The importance of strong tech earnings cannot be understated, as tech and tech-adjacent companies play a significant role in driving the overall market. As such, new businesses in these sectors have the potential to benefit from the positive market momentum and investor interest. However, it is crucial for these companies to consistently exceed expectations as analysts revise them higher. Generating positive surprises through strong performance and innovation is essential for sustaining upward momentum and attracting investor attention.
Additionally, while the Federal Reserve's impact on the stock market may be more likely in the future rather than the present, changes in its policy and signals of progress with inflation could trigger further rallies and market shifts. Therefore, new businesses should closely monitor the Federal Reserve's announcements and adapt their strategies accordingly.
Despite potential challenges, remaining optimistic about further gains is important. With 113 trading days remaining in 2023, and the possibility of continued market rallies, new businesses have an opportunity to leverage the positive trend and build on the established market momentum.
In conclusion, the current stock rally has the potential to impact new businesses positively. Companies in the tech sector can benefit from the growing market interest, but they must constantly strive to exceed expectations. Monitoring the Federal Reserve's actions and staying adaptable will also be crucial for navigating the evolving market dynamics. By capitalizing on the positive trend and maintaining a proactive approach, new businesses can position themselves for success in the midst of this stock rally.
Article First Published at: https://www.cnbc.com/2023/07/21/this-years-big-rally-has-come-to-only-a-few-days-again-challenging-market-timers.html.svg)
