But this has been a sentiment-driven rally. The pep talk from Powell and the relative stability in oil, though at elevated prices, made everyone feel better, but they don’t add up to much. Vladimir Putin can still shock the market at any time, and investors haven’t fully grasped what it will take to rein in the worst inflation in 40 years. As Morgan Stanley’s chief U.S. equity strategist Michael Wilson put it in a note to clients, the past week was “nothing more than a vicious bear market rally.” He added, “While it may not be completely finished, it is a rally to sell.”
The Nasdaq isn’t technically in a bear market anymore after its recent recovery. For the most part, there’s nothing wrong with buying a diversified portfolio of stocks when they go on sale, especially if you’re investing for the long run to send your newborn baby to college in 18 years. But something tells me that last week’s dip buyers have a more aggressive strategy in mind, and history tells us they should be careful.
Jonathan Levin has worked as a Bloomberg journalist in Latin America and the U.S., covering finance, markets and M&A. Most recently, he has served as the company's Miami bureau chief. He is a CFA charterholder.