The S&P 500 is up 10% over the year’s first three months. During that period, it reached record highs on 22 days. Now what?
What could push the market higher? First, America’s largest companies will announce earnings in a few weeks. These corporations will also, in many cases, offer forecasts for the second calendar quarter and the full year. No matter what else is happening in the economy, a wave of earnings that beat expectations and strong forecasts should push the market higher. These AI stocks could do very well.
The Fed controls the market’s direction to a large extent. The central bank has signaled that investors should not expect a cut until mid-year. The tone of what is said, if and when a cut is made, turns on whether the Fed plans to cut aggressively for the balance of 2024. Ironically, aggressive cuts would be due to a weakening economy. Investors will get to pick their poison. An economic slowdown will hurt the stock market.
Crude oil prices have started to move up. They were $71 early in the year and are currently $81. Trouble in the Middle East could cut supply, as could attacks by Ukraine on Russian oil facilities and a sharper drop in traffic through the Suez Canal. In June 2022, crude moved above $100 just as Russia invaded Ukraine, which caused worries about an economic slowdown. A sharp rise in oil will cause anxiety again.
Unemployment has been below 4% since February 2022. This February, it was 3.9%. A rise in this figure would signal an economic slowdown. Ironically, if the jobless rate continues to stay low or even drops, it will raise concerns about inflation–and the Fed.
Investment banks and economists have started forecasting where the S&P will trade on the final day of 2024. No matter how expert they are, these numbers are only guesses.
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