What’s next for Wall Street’s new “Everest”?

Reaching all-time highs is so common this year for stock indices that it is news – and at the same time – for stock indices Standard & Poor’s 500, Dow Jones And nasdaq, records, they can go unnoticed. Wall Street is witnessing a stock market party this year that is different from previous ones. A party that seems difficult to spoil under the current circumstances, but at the same time there are many points of uncertainty and perhaps that is why the atmosphere is not so “festive”. There’s also a more general “numbness” caused by the terrifying precision of it all.

The rise in stocks is due in large part to the frenzy artificial intelligenceThis outweighed the disappointment at not lowering interest rates. In other words, think how much higher stock indexes would have been if the Fed had already started cutting interest rates in March. As markets internalize a scenario that wants the Fed to cut interest rates at most twice this year, investors are focusing on developments in artificial intelligence as well as the state of the US economy.

The Fed has the ability to provide additional “fuel” for the rally. According to Morgan Stanley, the market has underestimated the US Federal Reserve’s intentions and could end up going ahead with the same number of cuts as the European Central Bank 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 that wants Jerome Powell to go ahead with three cuts in 2024 is still quite valid.

If we take traditions into account, the chances of the continued rise 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, five of the world’s most important stock market indices recorded historic performances. The S&P 500 finished the week at 5,303 points, on Wednesday 5/15 it closed at an all-time high of 5,308 points, while on Thursday 5/16 it reached the trading session at 5,308 points. 5.325 units. The Dow Jones index ended the week at an all-time high of 40,004 points, after reaching 40,050 points during Thursday’s session. The same applies to the Nasdaq, FTSE 100, and DAX. They all rose during the week to all-time highs.

On the economic front, inflation is one of the key indicators that both investors and the Federal Reserve monitor because it is directly linked to interest rates. That’s why April’s reading brought smiles that translated to all-time highs for all three of Wall’s key gauges. Americans saw inflation for weakens To 3.4% in April, from 3.5% in March. The decline is considered very important going forward because inflation in March “reached” the highest level since last September.

With inflation data like this and supported by other measures like retail sales showing the US economy is easing its feet a bit, investors are now hoping the Fed will move faster on interest rate cuts, at least compared to the worst-case scenario. The scenario called for interest rates to remain unchanged throughout 2024.

Another factor that could sustain the rally is the return of retail investors. The lights may have been turned on in recent days Meme stock Like GameStop and AMC, but Bank of America is seeing a general increase in investment activity this year. Individual investor activity reached record levels in 2021, declined significantly in 2022, and began to recover timidly in 2023.

This is all good, but there is another side. Punctuality has caused significant problems in the economy that may not yet be felt to an extent that makes the need to lower interest rates inevitable. The Fed is likely to succeed Smooth The economy is down, but we may see that later in the year shrinkage Corporate profits due to weak economic activity. The first bell comes from data related to consumer behavior.

According to a report by the Urban Institute Consumers In the United States, they started paying with a credit card for their daily purchases, while 20% do not repay the amount at the end of the month, which means they pay interest, while the average interest rate for credit cards in the United States jumped to 21.6% this year, from 14.75% in Early 2021.