The American Federal Reserve’s failure to set any new records on the stock market in the near future has led investors to shift their focus towards alternative sources. After inflation exceeded expectations and the Fed Chair rejected further rate cuts, it became clear that interest rates would remain high. This caused government bond interest rates to rise, impacting debt servicing and the housing market. Despite this disappointment, the S&P 500 is still up over 5% since the beginning of the year, thanks to the strong performance of American companies and hype around artificial intelligence. However, there is a growing expectation that these companies will deliver real profits rather than just speculation.
The “Magnificent Seven” tech companies responsible for recent market highs are under pressure to fulfill their AI plans and show real profits. While Meta has shown positive results, there is still uncertainty around 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 is a crucial driver of the economy, but there are concerns about consumer spending slowing down and its impact on inflation. The low savings rate in America indicates that consumers are using up their savings quickly, which 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 performance like Amazon and Apple will provide insights into the market’s trajectory. Investors are navigating uncertain waters by focusing on real profits and economic fundamentals rather than speculation.