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Coming off the worst first half in over fifty years, both the stock and bond market seemed primed for at least a rebound. Rising interest rates, high inflation and worries about a possible recession had combined to bring the ‘pandemic-induced’ bull market in stocks to a screeching halt in the first half. However, one of the biggest signs that maybe the selling in the first half had gone too far was the Bank of America June investor survey, wherein they described investor sentiment as ‘apocalyptic’, with global growth and profit expectations at an all-time low, recession expectations at their highest since the pandemic-fueled slowdown in May 2020, investor allocation to stocks at lowest level since October 2008, and cash at the highest since 2001. That extreme level of bearish positioning in stocks set the stage for a counter-trend rally. That spark was then lit by hopes that the slight cooling in rampant inflation would get the Federal Reserve to slow the pace of its rate hikes in time to avert an economic contraction, as it did after a similar market meltdown in the 4th quarter of 2018. Stocks bounced sharply, lead by the technology and other ‘high growth’ sectors that had taken the worst drubbings in the first half sell-off. The S&P500 bounced more than 16% off the June lows, while the ‘tech heavy Nasdaq Index advanced over 20%, which put U.S. stocks on course for one of their best summers on record. Canadian stocks participated in the bounce as well, with the S&P/TSX Index gaining over 10% off the lows. But the gains here were less than those ‘south of the border’ as Canadian stocks were held back by some aggressive selling in the ‘formerly red hot’ energy sector. (more…)