“We’ve seen a succession of inflationary pressures reverse,” said Patrick Palfrey, senior US equity strategist at Credit Suisse. He added that this “forced” investors to re-evaluate their trading positions.
Bankers said retail investors had contributed to the rally. Sharp rises in so-called meme stocks and a rise in some cryptocurrencies also indicate large participation from individual investors.
“The cornerstone of this is the job market, and it’s rock solid,” said James Masserio, co-head of equities for Americas at Société Générale. “If you don’t have a job, you don’t buy meme stocks.”
Experts also said the stock markets were poised to move higher. Investors had scaled back their bets on the market due to uncertainty. Trading volume was also low, with many major investors taking vacations through August. As a result, even small amounts of buying interest have helped boost the market, building momentum as other investors chase returns.
Understanding inflation and how it affects you
More than $11 billion flowed into funds buying US stocks in the week through Wednesday, according to EPFR Global, the most in eight weeks.
But some bankers warned that just as soon as the markets recovered, they could fall again. Short-term gains are not uncommon during periods of prolonged losses, known as bear market rallies.