The revival of the stock market over the last several weeks has been most impressive. After dropping by over -7% from May 22 to June 24, stocks as measured by the S&P 500 Index (SPY) suddenly reversed higher and have spent hardly a moment looking back. In the 18 trading days since the June 24 bottom, stocks have advanced in 15 of these sessions. This is an incredible 83% winning percentage for a market that appeared on the brink of cascading lower when the latest rally got underway.
The good news for investors may be that "smart money" tends to sell early while the market is still rising, while there are still bullish investors willing to take the other side of their sell orders.
Since making a new all-time high on March 27, the S& 500 has risen 7%. That may make some investors and pundits nervous, but there is little to fear with regard to new highs per se: Stock prices do not mean-revert -- i.e., rather than fluctuating around an average, stock prices tend to drift upwards over time.
As the Federal Reserve tightens policy and emerging-market demand cools, we are going to see plenty of unsustainable growth models fail to meet Wall Street expectations and slowly come apart at the seams.
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