Market Update – 7/26/2021
The stock market was like a roller coaster this week. Monday saw a sharp decline, but the loss narrowed before market close. The subsequent rise continued and turned the stock market from red to green for the week. The Delta variant’s impact on the market seemed to have disappeared starting Tuesday.
After the pandemic began, many people believed the market would rebound after the big drop, resulting in an influx of buying from rookie investors. Now, even analysts at JP Morgan and UBS are encouraging their customers to buy in on dips.
From another perspective, CNN’s Fear and Greed index showed that the market was in a “panic” mode just before the decline, which was conducive to the subsequent rebound.
However, from a fundamental point of view, the University of Michigan survey showed a great reduction in consumers’ willingness to buy houses and autos, which may have a major negative impact on future economic development. This is in addition to the lower-than-expected China economic growth data and the continued decline in Citi’s economic surprise index mentioned last week.
Although the market has always rebounded after falling in a previous year, it is not certain to develop in this way in the future. Our philosophy is long-term holding within risk tolerance and to not panic in unfavorable market conditions. However, buying the dip after a drop may not be a reliable strategy.
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