HomeFinancial MarketsInvestors Doubtful of Inflation Rebound Amid U.S. Stock Rally

Investors Doubtful of Inflation Rebound Amid U.S. Stock Rally

Investors have expressed doubts about whether inflation can continue to cool down as high stock valuations persist. U.S. stock indexes have been on the rise since the day of the Midterm elections.

The Nasdaq Composite Index gained 8.1% over the past week, with tech stocks such as Amazon.com Inc, Microsoft Corp, and Google-parent Alphabet Inc making significant short-term gains. Despite this recovery, investors remain hesitant to invest in such companies considering that they have largely declined over the course of the year. Furthermore, these companies recently posted third-quarter earnings that have disappointed industry analysts.

Tech stocks have been hit significantly in 2022, with S&P 500 falling by 16% and the Dow Jones Industrial Average losing 7%. The Russell 1000 growth index remains 25% down for the year.

King Lip, chief strategist at Baker Avenue Asset Management believes that Thursday’s CPI news could shift investor perspectives with regard to major tech stocks. Should bond yields continue to fall “the pace at which people are reducing their exposure to these large-cap tech names is going to slow down,” he claimed.

J. Bryant Evans, portfolio manager at Cozad Asset Management, agrees with this sentiment, explaining that an inflation cooldown could also restore investor confidence.

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