Despite weak jobs report numbers, the risk of rising inflation, and concerns about overvaluation, the market continues to rise.
On Friday, the S&P 500 hit a new intraday record high for the second day in a row, eclipsing the previous mark of $4,098.
With so many headlines warning about the risk in the market right now, you may be wondering why we continue to see a bullish market.
As I see it, there are several factors that keep driving the market upward, and should continue to do so throughout the year.
As we discussed briefly on Friday, traders took the reassurances from Federal Reserve Chairman Jerome Powell as an encouraging sign that the regulatory body would help to keep inflation in check – a huge concern for traders.
Treasury yields have also come back down after fears of rising yields and lowering prices would create a rotation out stocks and into the bond market, as well as make it more expensive for businesses and individuals to borrow money.
But chief among the reasons for the market’s continued bullishness is the sheer number of new investors flooding the market.
The aggressive buying of both value and growth stocks from novice investors – many armed with fresh capital from their stimulus checks – is continuing to fuel the market’s climb.
Unless we see a massive correction in the market, I don’t believe that the huge influx of cash that’s flooded the market over the last year is going away anytime soon.
Trading tip of the week
I always keep an eye on specific days and specific months for the best time to trade.
Studying patterns can help to identify when we’re most likely to see surges.
We know that the best months historically are October to April. Also, we usually see buyers at the end of the quarter and the beginning of a new quarter.
Earnings report to watch
Banking stocks have fluctuated over the last month as interest rates have been on the rise but the Fed has taken a dovish posture in keeping them fairly low.
I’ll be watching this Wednesday’s earnings report release for JPMorgan Chase & Co. (JPM).
Expectations are that JPM will report higher revenues for the most recent quarter, so the results may need to really impress in order to move the stock higher.
Either way, JPM’s results should give us a good measure of the health of the banking industry and what to expect from bank earnings reports still to come.
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