Wall Street Bull Run: Can the Market Momentum Outpace Economic Uncertainties?
1min read As the U.S. stock market continues to surge, reaching new historical highs, investors and analysts find themselves questioning the sustainability of this bullish momentum. Last week, major indices such as the Nasdaq and S&P 500 witnessed substantial gains, with technology and consumer discretionary sectors leading the charge. These gains are partially fueled by rising expectations of a dovish turn by the Federal Reserve, with interest rate cuts anticipated in the near future.
The current economic environment reveals a mixed picture with marginally weaker economic data but resilient consumer spending and investment. Manufacturing shows signs of improvement with a surprise uptick in the PMI and new orders, although non-manufacturing PMIs and new orders have weakened. Meanwhile, consumer confidence has significantly climbed, suggesting a robust personal consumption outlook despite rising short-term inflation expectations.
On the employment front, new data has shown a continued decrease in layoffs, with job openings exceeding forecasts. November's non-farm payroll numbers also surpassed expectations, and although unemployment figures have slightly increased, the labor market remains relatively strong.
In the realm of corporate earnings, the S&P 500's earnings growth projections have slightly narrowed. Nevertheless, macroeconomic conditions, including expected interest rate cuts, have contributed to a decline in U.S. treasury yields across the board, thus easing liquidity conditions.
Despite these optimistic indicators, concerns linger regarding the potential headwinds due to the prevailing high interest rates and uncertainties during the political power transition period. These factors could pose challenges to the current bullish trend. As a result, analysts maintain a cautious approach, keeping a neutral rating on U.S. stocks for the week.
