It has been another positive week for stock markets, with the S&P 500 pushing out to its best levels since early June. Of course, the index is still down by around 10% for the year to date, but this latest recovery will give investors some hope that perhaps a major bottom has been reached.
There have been recoveries along the way this year as no market moves up or down in a straight line. These have ultimately run out of steam, and the market has turned lower. But this recovery over the past couple of months is the longest bounce back in 2022 in terms of the time it has been in place, which could help bolster investors' confidence that stocks may be past the worst.
Last week there was much discussion about whether the US was in a technical recession or not because it has had two quarters of negative growth which is usually accepted as the recession definition. The US economy has been weak over the past six months, but interestingly that could also help the argument that stocks have bottomed.
Let’s not forget that markets are always looking forward - a bounce back by stocks may suggest that investors believe any economic downturn will be short-lived. The problems of high inflation do not appear to be going away anytime soon - but there is a chance that we could be past the worst.
This week's other focus was on the oil market, with a meeting of the oil-producing nations OPEC+. In the end, this was perhaps something of a damp squib, with the cartel agreeing to raise production by 100,000 barrels per day, widely considered negligible.
At the moment, oil is hovering around levels last seen in february this year - a good $35 below the highs seen in June. It is difficult in the short to medium term to see a reason why oil should suddenly soar again - perhaps a more stable oil price will be another factor to make investors somewhat more relaxed about the state of the world economy.
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