Financial and stock investment market concept. Fluctuation of value which price is rising up and falling down along the way
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An easing of pandemic restrictions in China and a slight decrease in how much Americans have to pay for goods — other than food and energy — are among the reasons your clients should not be too pessimistic about the stock market, Invesco suggests.

“We are far closer to the bottom than the top” of the stock market, wrote Kristina Hooper, Invesco’s chief global market strategist, in a market note released Tuesday.

The S&P/TSX Composite Index was down more than 12% for the year on Tuesday, while the S&P 500 was down almost 20%.

Meanwhile, U.S. consumer prices rose 9.1% in June compared with a year earlier, the biggest yearly increase since 1981.

Still, the global market is “overly pessimistic,” Hooper wrote.

One source of light at the end of the tunnel comes from China, where Hooper said economic activity is improving.

China has moved from a “zero Covid” policy to a “dynamic zero Covid” policy to a “dynamic social zero Covid” policy.

“That means smaller areas, such as neighborhoods, could be locked down in the event of a rise in infections rather than larger geographical areas,” Hooper wrote.

With a lot of cities in China re-opening, an improvement in delivery times have helped ease global supply chain pressures, she added. “This indicates that at least one inflationary pressure is easing.”

Hooper also pointed to signs that U.S. inflation could ease off. Two studies — one from the University of Michigan and the other from New York Fed Survey of Consumer Expectations — show that “longer-term inflation expectations are reasonably well-anchored and becoming slightly better anchored,” Hooper wrote.  Both surveys showed an increase in one-year inflation expectations but a decrease in five-year inflation expectations.

Commodity prices are also easing. The Goldman Sachs Commodity Index is down 19.9% from its March 8 peak while the Bloomberg Commodity Index is down 16.9% from its June 9 peak. This, Hooper wrote, should moderate the rate of increase in the goods portion of the U.S. Producer Price Index (PPI).

Other good signs in the U.S. include core CPI and person consumer expenditures (PCE), which exclude food and energy prices. Core CPI and PCE in the U.S. “have very recently actually declined slightly,” Hooper wrote, adding service PPI went up by only 0.4% month over month.

Hooper said these measures suggest the Fed is unlikely to follow the Bank of Canada with a 100-basis-point hike when it meets next week, arguing that a 75-basis-point increase is more likely.