Have markets bottomed out yet?

Markets rallied on Monday as the S&P 500 closed 2.6% higher and the Dow Jones Industrial Average gained 2.3%. These fluctuations in a single day were enormous. Markets on Tuesday built on this momentum. Now mind you, we are still well below the January highs.

But that begs a question: are we finally done with sad markets, or at least the worst? Or are we going to be disappointed?

Anyone with a 401(k) or savings in hand — and that’s 58% of the country, according to Gallup — has likely looked at their investments in horror at some point in the last 10 months. The Dow was still 18% below its January high as of Tuesday morning.

“By any definition, we were definitely in a bear market,” said Mark Lehmann, CEO of JMP Securities.

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So why did the markets suddenly become happy on Monday? Could it be that the worst of the economic data is behind us? “Everything that could have gone wrong in the third quarter somehow went wrong,” said Lehmann.

Interest rates rose, the dollar rose, the euro and pound fell, and the inflation numbers were bad. “So maybe that was a bit of a relief rally.”

Don’t get him wrong – inflation is stubborn, a recession is likely, earnings this quarter are likely to be dismal. It’s not that things can’t get any worse, but that they might not get any worse than markets are already anticipating, said Jon Maier, chief investment officer at Global X ETFS.

“One day doesn’t make a sustainable rally. Neither, but we’re moving in the right direction because the market knows all these things,” Maier said.

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But of course things could get worse for the markets.

“We would argue that we’re still in a downtrend, we’re still in some kind of bear market,” said Sameer Samana, senior global markets strategist for the Wells Fargo Investment Institute.

Bear markets follow a pattern: they go down and they just stutter around for a while, bottom and eventually break through. At the moment we are in the sputtering phase.

“As time goes on and, you know, some of that Fed hawkishness starts to unravel — the first quarter of next year is probably the most likely time — then you should hope that markets start to slowly unravel back out,” he said Samana.

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But the moment markets recover won’t feel like the moment we – the consumers, the economy – recover. It may indeed be close to our darkest economic moment.

And that’s because the market doesn’t represent today’s economy. It represents the economics of months and years.

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