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Cramer’s perspective on the significant market low in 2023

by Joseph Mack

Stock Market Experiences Tremendous Rally Without Clear Trigger

Just like that, the stock market has been on a major upswing for a month without any clear cause for it.

No Earnings or Federal Reserve Impact

It’s not as though the recent surge in the stock market can be attributed to any specific factor such as strong earnings or actions by the Federal Reserve.

In fact, it was quite startling to see how little influence information from the Federal Reserve had on the two-step bottoming process: the peak in bond yields on Oct. 17 and the nadir in stocks on Oct. 28. The lack of clear triggers for such a major market move is eerily fascinating.

Complex Rally Mechanism

The mechanics driving this remarkable rally are complex, and they seem to involve moments where the inner workings of investor psychology are outweighing the realities of the bond market.

Initial Supply-Demand Issue

The expected rally was unlikely considering the supply-and-demand imbalance that was evident in the Treasury market in early October. This imbalance was compounded by the inflationary pressures being experienced at the time, which seemed to hold stocks down.

Earnings Fail to Explain the Rally

Even as earnings reports improved, they could not provide a satisfactory explanation for the significant market rally. Companies like Tesla, Microsoft, Alphabet, Amazon, and Apple all had varied earnings reports that did not appear to drive the market’s upward momentum.

Government Announcements and Economic Data

The real turning point in the stock market rally came with a Treasury refunding schedule announcement on Nov. 1, which lightened the long-end debt issuance expected for 2024. Additionally, a lower-than-expected job creation figure released by the Labor Department on Nov. 3 confirmed the market rally that had initially started on Oct. 28.

Investor Psychology Plays a Key Role

The stock market’s oversold position hinted at something larger at play, signaling that investors were positioned incorrectly. This led to a scenario where smart buyers quietly began buying stocks, soaking up the oversupply, and defining the market bottom with their purchases.

Rally Expected to Continue

This surge in the stock market is likened to events not seen in almost 30 years, and it may likely continue until new stocks hit the market or a weak bond auction disrupts the bond market.

In conclusion, the recent stock market rally has been unexpected and unexplained by traditional market indicators. The surge has largely been fueled by investor psychology and unexpected government announcements, indicating that the rally may continue until specific market events occur to disrupt it.

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