We’ve enjoyed a powerful stock market rally so far this year. Below, I examine whether the bull has enough mojo to carry it through the end of this year and into 2024.

Hopes are rising on Wall Street that the S&P 500 can reach its all-time closing high by year’s end. The stock market’s rally fulfills the prediction I made at the start of this year that, despite the gloom-and-doom at the time, the broader market would exit the bear market and embark on a sustained bull run.

Dire talk about hyperinflation and economic ruin turned out to be malarkey, as I knew it would. Inflation is falling and the Federal Reserve no longer projects a recession.

Stocks should continue to drift higher in the second half of 2023, although the pace of gains is likely to moderate in the wake of the S&P 500’s nearly 20% surge year to date.

Coming in for a soft landing…

Investors are digesting two reports that came in on Tuesday. The U.S. Labor Department’s June Job Openings and Labor Turnover Survey (JOLTS) fell slightly short of expectations: 9.58 million (actual) compared to 9.6 million (estimated).

The ISM manufacturing index also missed estimates, for a reading of 46.4 (actual) versus 46.9 (estimated), for the month of July.

The upshot: The jobs and manufacturing sectors are cooling, but they haven’t cratered, providing further support for the “soft landing” scenario.

The bulls are back. But can the rally last? This chart suggests that it can:

The S&P 50 index remains well above its 50- and 200-day moving averages. Other technical indicators are bullish as well. Notably, the New York Stock Exchange Advance/Decline line is rising, and the CBOE Volatility Index (VIX) is falling. In previous Mind Over Markets installments, I’ve explained in detail how these indicators work.

WATCH THIS VIDEO: The Running of The Bulls

Nonetheless, the winning streak was due for a breather and we just got one. The main U.S. stock market indices closed sharply lower Wednesday as follows:

• DJIA: -0.98%
• S&P 500: -1.38%
• NASDAQ: -2.17%
• Russell 2000: -1.37%

The slump was triggered by the lowering by Fitch Ratings on Tuesday of its rating on U.S. debt, from AAA to AA+. In meetings with Biden administration officials to discuss the downgrade, Fitch Ratings representatives cited the insurrection of January 6, 2021, as a serious concern about the stability of U.S. governance. The debt ceiling imbroglio of June is said to have been a factor as well.

The good news is, second-quarter corporate earnings results continue to deliver unexpected gifts. The big test will come Thursday, when Amazon (NSDQ: AMZN) and Apple (NSDQ: AAPL) are scheduled to report quarterly results. The report cards of these two bellwethers will provide insights into the strength of consumer demand.

Tech companies so far have been hitting their Q2 numbers out of the park. Notably, chipmaker Intel (NSDQ: INTC) came back from the dead with a beat on the top line. But it’s not just the mega-cap brand names; smaller tech companies have joined the earnings party, too.

Overall for Q2, year-over-year earnings results for the S&P 500 are projected to decline by -7.1%, according to FactSet. That’s an improvement over the decline of -9% originally forecast.

We’ve reached the mid-point of the Q2 earnings season for the S&P 500, and the number of companies reporting positive earnings surprises has been above recent averages.

We seem to be on the cusp of reaching a bottom in quarterly earnings results, with positive growth projected for the third and fourth quarters of 2023.

As 2023 barrels into the H2 stretch, developed economies appear to be regaining their footing, while growth in emerging markets is picking up steam.

Expectations for the global economy, especially for U.S. economic growth, are improving. To be sure, China’s economy has hit a rough patch, but Europe and Latin America are showing surprising growth.

Data released Monday show the euro zone is growing again as inflation wanes. Gross domestic product across the 20 countries that share the euro currency climbed by 0.3% in the second quarter, compared with the previous three months.

For U.S. economic data, investors this week are looking toward initial jobless claims, U.S. productivity, S&P final U.S. services PMI, ISM services, and factory orders (scheduled for release Thursday); and U.S. nonfarm payrolls, the U.S. unemployment rate, and U.S. hourly wages (Friday).

As I’ve just explained, next year is shaping up to be a good one for U.S. and international equities. It’s time to buy stocks, while valuations remain reasonable.

If you’re more of an income investor, I suggest you consider our premium trading service, Rapier’s Income Accelerator, helmed by our income expert Robert Rapier.

Robert Rapier can show you how to squeeze up to 18 times more income out of dividend stocks, with just a few minutes of “work” each week. Click here for details.

John Persinos is the editorial director of Investing Daily.

To subscribe to John’s video channel, click this icon: