A Real Recovery or a ‘Dead-Cat Bounce’?

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Last week the S&P 500 closed on a positive note and put an end to a multi-week losing streak that almost led the index into bear territory.

According to Master Investor, this is to be more of a dead-cat bounce than a real recovery, as economic data continues to point to weakness. Too many years of ‘easy’ money-filled Wall Street with excess liquidity, boosting stock prices to unsustainable levels.

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On the one hand, money flowing to the stock market is the primary reason why inflation remained subdued. But, on the other hand, this excess liquidity mixed with a buying-the-dip mentality, created the conditions for market crashes to happen from time to time.

Unfortunately, inflation is rising faster than anticipated (even though this likely has nothing to do with monetary easing) and central banks are tightening. All that easy money sitting in the market will disappear.

We aren’t done yet, according to Master Investor.

We will assist a downtrend trend that could even end in a crash if central bankers put too much pressure on liquidity. But one way or another, the next few months will most likely be weak for stocks.

Every cloud has a silver lining, and the current market correction will provide some good entry points for growth stocks later in the year.

 

Source: Master Investor by Filipe R. Costa

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