Has the stock market bottomed amid inflation?

Yahoo Finance Live’s Brian Sozzi on whether or not the stock market has bottomed.

Video transcript

JULIE HYMAN: It has been a tough few months for the stock market. And yeah, the S&P 500 on its first six-week losing streak since June of 2011. The Dow on its worst streak since 2021. The swings in the market leaving many investors wondering if we are nearing the bottom. And that's where we find Mr. Sozzi's take today. Sozz, are we there yet?

BRIAN SOZZI: I want to be very clear-- I am not predicting a bottom in the stock market or a rip your face off rally. I'm just setting the stage on really two debates now happening in the markets. And I wrote about this a lot in today's "Morning Brief" newsletter. First one is the view that valuations in the market are, in fact, starting to get attractive. FactSet put out some good data over the weekend, noting the S&P 500 forward price to earnings multiple, 16.6 times. That is below the five-year average of about 18.6 times. The 10-year average is at about 17 times or so. So that, to some, is being viewed as attractive valuation.

But I bring this up, two things. First, we're still seeing very, very high levels of inflation that is starting to put a lot of pressure on profit margins, making the case that perhaps valuation is not attractive. And there you could see me with-- in my inflationary bag of groceries. And then number two, if you look back over the past 10 years, like FactSet did for valuations, it doesn't really include a major rate hiking cycle like we are about to go into now. So you have to question, are valuations really, in fact, attractive?

And next up here is something that [? Marci ?] mentioned, too, over at Bank of America moments ago, capitulation. We have seen a series of big down days in the markets over the past three weeks. We have also seen a series of big up days. The general view on the Street, at least according to folks that I talked to, not seeing that big capitulation or that big extreme down day in the markets where all the sellers are just shaking out. All that speculation is wiped out of the market, and then you could start to get-- rebuild a base of buyers here are true believers in the market.

Ultimately, here is my take. And it is no one trying to pick a bottom right now or calling for one has any clue on what they're talking about. And if they tell you they do, they are lying right to your face. It is, you do not pick a bottom or realize the bottom is in a market until well after the fact. So stay just focused and scrutinize all these calls, because they're coming, and they're coming very soon.

BRAD SMITH: And there's not a period that we can look like-- look back to, to really see if there's been precedent, especially with these types of crosswinds that we've got right now-- a Fed raising rates. You've still got COVID lingering in certain parts of the world, China causing shutdowns as well. And the inflation concerns that still persist heavily for the Fed to navigate through and consumers are feeling.

BRIAN SOZZI: The only near-term precedent I would point to-- and Liz Ann Sonders, friend of the show over at Charles Schwab, put out a good chart this morning on Twitter, noting that the price to earnings multiple for the S&P 500 down 30% from its highs, now back to levels when the bear market at the height of COVID happened in March 2020-- April to March of 2020. So that is something very interesting, but again, just different dynamics. Major inflationary right now, inflationary period.

JULIE HYMAN: To be fair, I don't think I've heard anyone say that it is a bottom.

BRIAN SOZZI: They're out there, Julie. They lurk.

JULIE HYMAN: There are not too many of them. There's not that many.

BRIAN SOZZI: If you want to if you want to drill down into the Goldman Sachs call this morning, his baseline call-- that is David Kostin-- is still 4,300. You have the S&P 500 at about 4,000 right now. He's not coming out and say it's a bottom, but still, you have those type of calls suggesting upside from current levels that could be read, perhaps, that we are near the bottom.

JULIE HYMAN: Yeah, I don't know. I think most people avoid, especially strategists avoid trying to time the market, because it is almost, almost impossible to do. It is very, very [INAUDIBLE] to do.

BRIAN SOZZI: I've done it a few times.

JULIE HYMAN: No, you haven't.

BRIAN SOZZI: I'll send you the link.