A flexible US economy and expectations that neared a peak in the monetary policy of the Federal Reserve of a tightening cycle that is encouraging stock investors, as well as worrying persist over the rising valuations and the possibility of an inflation rebound.
The S&P is up almost 19% this year after profiting about 1% in the previous week. Since the 1st of June, the points have risen to almost 10%. Over this time, the US government ignored any debt ceiling default, consumer prices cooled while the growth remained resilient.
One critical factor that has driven the stocks higher has been the overview that the economy is shifting towards a ‘Goldilocks” scenario of dwindling consumer prices and strong growth that many presume is a healthy stock backdrop.
“The market has fully accepted the narrative that it wanted, which is Goldilocks. Until we see some set of data that scares them it’s hard to see how that changes.” – Bob Kalman, Senior Portfolio Manager, Miramar Capital.
Additionally, investors are also expecting that it is unlikely the Fed will deliver a tightening monetary policy that had shaken the market last year.
“For markets to continue to trade higher, the soft landing must be a soft landing, not a reacceleration, because if housing and consumer spending accelerate from here, the Fed will have to raise rates a lot more,”
the Chief Economist of Apollo Global Management, Torsten Slok wrote.
Kalman, however, believes that there is a rising chance that Fed might increase their rates to exceed their present 5.50% benchmark and stick to them for longer than expected, which is something that he worries might diminish the economy and hurt the risk assets.
“It’s a 50-50 chance that we’ll get Goldilocks or we’ll get a stronger downturn,”
Many have been evaluating the durability of the tech stocks rally, which is fueled partly by the excitement over AI developments.