While stock exchanges worldwide bounced back following the grueling grind of 2022’s dismal market, insiders are beginning to wonder if the current market rally is finally losing steam.
In general, this has been a good year for the market, particularly in the United States after signs that the Federal Reserve would finally pull the reins in on its seemingly endless interest rate hikes began to show. In the tech scene, market action was fueled by the rise of new innovations, including a boom in the artificial intelligence (AI) sector.
But despite the general optimism and the United States’ resilience against getting battered by one rate hike after another, it appears that a looming hike on the part of the Fed is starting to wear away at whatever has been gained this year.
Here Come the Signs
This year, much of the rally was driven by a surge in the values of tech shares which broadened towards the end of the second quarter. In recent weeks, however, that broadening has begun to taper off.
Just this week, the number of stocks trading over their 200-day moving averages on the S&P 500 dropped to the lowest since the end of the first quarter of this year. Tech stocks have also taken palpable hits, with the likes of Apple, Microsoft, Nvidia, and Tesla registering a drop in their value in recent weeks. As such, a narrow rally spells trouble for the market as only a few stocks are holding it up, making it particularly vulnerable for a downturn.
Also, the overall mood in the indices has been gloomy, to say the very least. Extreme fear has been the most notable sentiment among traders; the last time this happened was in March of this year when the collapse of Signature Bank and the Silicon Valley Bank spooked economists and recession loomed on the horizon.