The stock market surprised us all with its fluctuation last month. The S&P 500, a well-known index to which many 401(k) accounts are tethered, saw a near-historic fall through the first half of the year before recovering in July with its best month since November 2020.

The performance of the two main indices, the tech-heavy Nasdaq and the Dow Industrial Average, also changed.

The abrupt turnaround happened despite the economy barely changing. Similar to prior months, the Federal Reserve increased borrowing costs in an effort to restrict economic activity, reduce demand, and rein in inflation. The government also provided conflicting economic statistics.

Investment gurus told ABC News that the reason for the rebound is also the reason why traders shouldn’t expect it to last: expectations.

A stock boom, which depends on investor confidence about the prospects for corporate earnings, doesn’t exactly seem like it’s in the works.

According to the strategists, investors had reduced expectations throughout the first half of the year when the market crashed and pessimism took hold. Investors noticed a rationale for a change in attitude last month when the Federal Reserve said it might eventually slow rate hikes and numerous firms posted better-than-anticipated results, they continued.

The market is positioning itself for underperformance in light of enduring economic issues including inflation, the Russia-Ukraine war, and supply chain disruptions brought on by the pandemic, according to analysts. The market’s robust gains in July raised expectations.

Market morale has been stressed for months as a result of an economy plagued by a severe supply and demand imbalance. Following a rush of economic stimulation brought on by the epidemic and a general shift toward products rather than services, demand surged.

During this time, the stimulus helped the economy quickly rebound from the recession that began in March 2020, which led to a hiring frenzy.

The strategists claimed that the rapid pace from July is not maintainable. Additionally, they continued, investors can anticipate erratic highs and lows for the rest of the year.

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