A ‘less hawkish Fed’ wouldn’t kickstart a new bull market: here’s why

By:
on Jul 11, 2022
  • Matt Maley says 3,900 level is a crucial resistance for the S&P 500 index.
  • He explains why a less hawkish Fed wouldn't mean a strong rally in SPX.
  • Maley says there's reason to believe the market hasn't bottomed just yet.

A near 4.0% rebound in the S&P 500 last week should be treated only as a bear market rally unless the 3,900 level is intact, says Matt Maley. He’s an Equity Strategist at Miller Tabak.

Maley’s remarks on CNBC’s ‘Worldwide Exchange’

A break above that crucial resistance, as per Maley, will send out a strong bullish signal. This morning on CNBC’s “Worldwide Exchange”, he said:

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3,900 was the low in May. Then we broke below it in June. So, the old support became a new resistance. It’s also very close to the trend line. So, if you can meaningfully break above 3,950 or so, that’s going to be very bullish.

He expects the earnings season that’s set to kickstart this week to offer further clarity on where the market is headed. SPX is in the red this morning.

What if the Fed turns less hawkish?

Interestingly, Maley doesn’t expect the U.S. equities to aggressively recover even if the Federal Reserve turns less hawkish. Explaining why, the Miller Tabak analyst said:

Even if the Fed is less hawkish, we’re not going to go back to when the Fed was wildly accommodative. The stock market won’t go back to overvaluation [unless] the Fed is much more stimulative. And that’s just not going to happen.

He reiterated that the price to sales ratio on the S&P 500 is still near its all-time high, indicating that the market might not have bottomed just yet.  

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