The American Federal Reserve has not set any new records on the stock market in the near future. This realization has caused investors to shift their focus to alternative sources, as they have placed more hope in other factors. After inflation exceeded expectations and the Fed Chair rejected further rate cuts, it became clear that interest rates would remain high. This has led to an increase in interest rates on government bonds, which is impacting debt servicing and the housing market.
Despite this disappointment, the reaction has been moderate, with the S&P 500 still up over 5% since the beginning of the year. The strong performance of American companies and hype around artificial intelligence have been supporting factors. However, there is a shift in focus towards expecting real profits from these companies rather than just speculation.
The “Magnificent Seven” tech companies responsible for recent market highs are facing pressure to deliver on their AI plans and show real profits. While Meta has shown positive results, uncertainty still surrounds these high expectations. The market is closely watching the Fed’s next interest rate decision and the performance of other tech giants like Alphabet and Microsoft.
The American consumer remains a key driver of the economy, but there are concerns about consumer spending slowing down and its impact on inflation. Despite low savings rates in America indicating that consumers are using up their savings quickly, this could lead to a slowdown in consumption and inflationary pressure in the future.
Overall, markets are adjusting to a new economic narrative with a broader foundation supporting the S&P 500. The Fed’s stance on interest rates and company performances such as Amazon and Apple will provide further insights into the market’s trajectory. Investors are navigating uncertain waters with a focus on real profits and economic fundamentals rather than speculation.