Fears of Recession Fade as Bull Market Comes into View

Despite persistent recession fears, continued interest rate hikes, a spending slowdown, and a housing crunch, US stock markets are on the edge of bull market territory.

The S&P 500 has recently experienced a strong rebound, climbing nearly 20% from its lows in October. This surge brings it within striking distance of a bull market, which is when rising stock prices lead to optimistic sentiment on Wall Street. 

Closing at 4,283.24 on Tuesday, the S&P 500 is now only 10 points away from the threshold that distinguishes a bull market from a bear market—namely, a 20% gain from the most recent low recorded on October 12, 2022. If the index closes at or above 4,292.44, it will officially mark the entry into bull territory.

The US economy has shown great resilience over the past nine months, with the tech and media sectors leading the charge. Investors hope that these industries have weathered the worst of their challenges.

Momentum is increasing. The resolution of the debt-ceiling crisis, optimism surrounding the Federal Reserve's potential decision to pause rate hikes, and a series of robust economic indicators have all contributed to the upswing. 

However, economists are urging investors to hold off on the celebrations for now.  They point out that the S&P 500 is top heavy, meaning that mega-cap stocks such as Nvidia and Alphabet, fresh off an AI boost, are masking the struggles faced by smaller companies.