Market Overview

A Market Strategist's 3 Reasons For Incremental Optimism

A Market Strategist's 3 Reasons For Incremental Optimism

The S&P 500 index bottomed on March 23 and has since gained nearly 30%, which suggests "the worst news is behind you," Ned Davis Research's Ed Clissold said on CNBC's "Trading Nation."

Clissold's 3 Reasons For Optimism 

Three reasons to be incrementally positive on the market are in play, Clissold said. 

First, investors should never "fight the Fed," and now the central bank has not only "pulled out all the stops" to support the economy, but maintain a position that it will "continue to pull out stops" when needed, he said. 

Similarly, investors should never "fight the tape," Clissold said, adding that in recent weeks there has been a "clear improvement in the tape action."

Third, he said investors should be cautious on the "crowd of extremes," and his sentiment metrics are still showing a lot of pessimism.

These three readouts combined make the case for an upgrade from a bearish sentiment to a neutral sentiment, Clissold said. 

Clissold On S&P's Recessionary Trend

Some of the recent economic readouts have been disappointing, Clissold said, despite the S&P's rebound.

But from a historical perspective, the S&P 500 index tends to hit its lows on average four months before the end of a recession, he said. 

"So, if you look out a few months and think things will be getting a little bit better, stocks should anticipate that." 

'A Little Better Outlook'

A "secular bull" tends to look out several years, and there is little doubt the American public will "get through this," the strategist said, adding that the the U.S. economy remains the strongest in the world.

Clissold said that there will of course be challenges moving forward and "plenty of reasons" for investors to expect markets to re-test their lows.

But at the end of the day, he said "enough has improved to have a little better outlook."

Related Links:

Fed President Warns Of 'Long Hard Road' Ahead, Suggests 18-Month Strategy To Recover From Coronavirus Outbreak

What To Know About The Stock Market's Best Week Since 1974


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