Since Friday we saw the markets going up from important support of the S&P 500 of $3800 to $4000+ but what caused this? Is the bad news in the market over? Let’s take a look at possible reasons for markets going up and whether these will sustain the markets.
The Bad News-
Currently, the world is suffering from the major economic crisis that came just after waves of the covid outbreak, we are seeing the Russia-Ukraine war attracting more and more sanctions on Russia directly resulting in lesser trade with them, exports being affected which in turn is affecting the supply chain along with Covid lockdowns in China.
The “possible” Good News-
We saw the stock of Walmart and Target crash as these major American retailers struggle to keep the consumers coming back to the stores to purchase more, in mid-may this created a situation of uncertainty for the purchasing power of consumers, this also tanked their stocks and created a ripple effect on all retailers and subsequently tanked their stocks too pulling the markets down. But now as other major retailers come back with their own results for the quarter it shows a less significant effect on their bottom line strengthening the narrative that recession might not come.
The monetary policy of the FED is ever-evolving and with reports of inflation already peeking people anticipate fewer needs for rate hikes to balance it out ushering in positive sentiment for the stock market. This however is mostly SPECULATION.
When there is extreme fear in the market volume goes down and any big player with the right access to information and an eye for a bargain gets ready to strike and buys big, this creates a chain reaction of buyers. In a low-volume market, this results in something called the relief rally.