Stocks have sort of stopped falling.
After a violent sell-off in late August and another really weak period following the September Federal Reserve meeting, stocks had their best week of the year last week and have started to show signs of life. Since the beginning of October, the S&P 500 is up nearly 7%.
And in a note to clients on Tuesday, Gluskin Sheff’s David Rosenberg outlined ten reasons it looks like stocks have found solid support as we’ve moved into the fourth quarter of the year.
- People were overly pessimistic about the prospects for the stock market.
- At the market lows, over half (56%) of stocks in the S&P 500 had fallen at least 20%, indicating a market that was deeply oversold.
- The large number of speculators lining up bets that stocks would keep falling have been at least partially forced to cover.
- The Chinese yuan devaluation in August never touched off the “next leg of the global currency war.”
- There are tentative signs that the Chinese economy is not crashing and burning.
- The Fed is no longer viewed as having made a policy error by keeping interest rates at 0% in September.
- There is a growing view that consensus expectations for third quarter earnings had become too downbeat.
- Consumer confidence surveys, mortgage applications, and auto sales all indicate that US domestic demand remains solid.
- Oil looks to have put in a bottom.
- The Glencore fiasco never did (at least not yet) morph into some sort of financial event that destabilized the whole system.
Overall, though, it’s still be a weak year for the market and a challenging one for investors, with the S&P 500 down about 2% year-to-date
And of course, the stock market might still be crashing.
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