It has been quite common for stock indices to hit all-time highs this year, with the news that – at the same time – S&P 500, Dow Jones And nasdaq, Records, which may be overlooked. Wall Street is enjoying a different stock market feast this year than previous stock markets. A party, in the current situation, seems difficult to spoil, but at the same time there are many uncertainties, which is why the atmosphere is not “celebratory”. All have a general “numbness” caused by terrifying accuracy.
A large part of the rise in stocks is due to frenzy Artificial intelligence, which masked the disappointment of not cutting interest rates. In other words, think how much higher stock indexes would have been if the central bank had already started cutting interest rates in March. Investors are focusing on artificial intelligence and developments in the US economy as markets digest the possibility that the Fed will cut interest rates twice this year.
The central bank has the power to provide additional “fuel” for the rally. According to Morgan Stanley, the market has underestimated the objectives of the US Federal Reserve and it is not excluded that it will eventually continue with the same number of cuts as the ECB this year. The probability of a cut in July is relatively small (27.2% according to the FedWatch tool), but analysts at Morgan Stanley believe that the scenario in which Jerome Powell wants to continue with three cuts in 2024 is absolutely alive.
If we take tradition into account, the chances of the rally continuing increase dramatically. According to research firm CFRA Research, from 1924 to 2023, the average S&P 500 bull market lasted more than 4 years and returned 157%.
Last week, the world’s five major stock market indices hit all-time highs. The S&P 500 ended the week at 5,303 points, hitting an all-time high of 5,308 points on Wednesday 15/5, while reaching an intra-session high of 5,308 points on Thursday 16/5. 5.325 units. The Dow Jones closed the week at an all-time high of 40,004 after reaching 40,050 intra-session points on Thursday. The same applies to Nasdaq, FTSE 100 and DAX. All hit all-time highs for the week.
On the economic front, inflation is one of the key indicators that investors and the central bank monitor as it is directly related to interest rates. That’s why April’s reading brought smiles that translated to new all-time highs for all of Wall’s key metrics. Americans saw inflation weakens It was 3.4% in April and 3.5% in March. The pullback is seen as significant as inflation in March “fell” to its highest level since last September.
With inflation data like this and other measures like retail sales showing that the U.S. economy is letting off the gas a little, investors now believe that rate cuts will move faster, at least relative to the worst case scenario. It calls for unchanged interest rates through 2024.
Another factor that could sustain the rally is the return of retail investors. Perhaps the spotlight has been turned on in recent days Commemorative stocks Like GameStop and AMC, but Bank of America is seeing a general increase in investment activity this year. Retail investor activity reached record levels in 2021, fell dramatically in 2022 and began to falter in 2023.
All this is good, but there is another side. The lack of timing has caused significant problems for the economy, which has yet to realize the need to cut interest rates. The central bank will probably win Soft The economy is taking off, although this could be seen later in the year Summary Corporate profits due to weakness in economic activity. The first bell comes from data on consumer behavior.
According to a report by the Urban Institute, the Consumers While the average interest rate on credit cards in the U.S. has increased, 20% do not pay off at the end of the month, meaning they are paying interest. 21.6% this year from 14.75% at the start of 2021.
