CreativeVest Weekend Stock Market Report - Are you ready for a ripping bear market rally?

While it is possible that this market will rip higher, I wonder if this is institutional support or if the buyers are simply FOMO-driven, inexperienced retail investors and hedge fund short covering?

Bear markets don't just go down. There are intermediate-term rallies that occur and often lure in unsuspecting retail investors only to roll over again leaving the inexperienced investor holding the bag. Here are two things to consider before re-entering a bear market.

First, consider the economic backdrop. We are experiencing record levels of inflation along with a stagnating economy. Inflation doesn't just return to normal levels after a few rate hikes. It could take several rate hikes and years before levels return to normal. Also, stock appreciation is driven by earnings which are computed by dividing net income by # of shares outstanding. Net income is your profit (revenue minus all expenses). With many companies impacted by rising costs, I wouldn't expect income and therefore earnings to rise any time soon.

Next, if the market is going to recover, it won't go straight back up either. It will have to fight its way back up to new highs through overhead selling pressures. It will take time and give you plenty of opportunities to get into great stocks ahead of their big price runups. Don't have FOMO and be patient.

Barring intervention from the Federal Reserve in the form of reversing their decision to increase interest rates and pull back on QE, there doesn't appear to be any good reason for stocks to turn around and head higher all of the sudden. The economy appears to be in trouble due to inflation which will take some time to resolve. Also, markets don't usually go straight up following a bear market, it will take time giving you plenty of opportunities to capitalize on the next batch of big winners. Be patient and don't be a FOMO-driven retail investor.