S&P 500 index, experiencing the longest upward trend since the beginning of the year! Will the bullish market continue in the future?

moomooニュース米国株 wrote a column · Aug 21, 2024 15:41

On the 19th, the US stock market continued to rise, $S&P 500 Index (.SPX.US)$and $Nasdaq Composite Index (.IXIC.US)$rising for the 8th consecutive day, marking the longest upward trend so far this year. A series of economic indicators showing the resilience of the US economy led to buying on dips.

Individual stocks also performed well, $NVIDIA (NVDA.US)$rising nearly 30% in the past 10 days, $Nike (NKE.US)$It rose for the 9th consecutive day, marking the longest continuous high in about 8 years.

S&P 500 index, experiencing the longest upward trend since the beginning of the year! Will the bullish market continue in the future?

Expectations for an economic downturn continue to decline, with the U.S. economy expected to achieve a soft landing.
Recently released four economic data points strongly support market sentiment, rekindling expectations that the U.S. economy can achieve a soft landing:

●Decreasing inflation trend: In July, the U.S. Consumer Price Index (CPI) rose by 2.9% year-on-year, below the expected 3%, indicating a decline from June's 3%. This suggests a slowdown in inflation, potentially giving the Federal Reserve room for future interest rate cuts.

●Decrease in unemployment insurance claims: Last week's initial claims for unemployment insurance were below expectations at 0.227 million. According to this data, the July unemployment rate increased, but this may be due to seasonal changes in the labor market rather than an economic slowdown.

●Consumer spending growth: Retail sales in July increased by 1%, exceeding expectations of 0.3%. This shows that individual consumption continues to be strong, supporting the economic expansion phase.

●Improvement in sentiment among small and medium-sized enterprises: The small and medium-sized enterprise sentiment index reached its highest level since February 2022, indicating that managers are optimistic about the future economic outlook.

Economists' views on economic downturn are also weakening.According to the latest survey, more than half of economists expect the Federal Reserve Board (FRB) to implement 25-point rate cuts at the remaining 3 meetings in 2024. Although this expectation has increased from last month, they consider it unlikely that the US economy will fall into a recession.

In Goldman Sachs' latest research note, after raising the forecast of the possibility of the US economy entering a recession from 15% at the beginning of this month to 25%, it was then lowered to 20%.

Goldman Sachs economists stated that if the non-farm payroll numbers released on September 6 are positive, the forecast could be lowered to 15%.

Can the market's upward trend continue? Caution is still required.
The strong rebound in the US stock market has generated optimism, with many people claiming that the market's upward trend will remain strong in the future.

According to the latest institutions survey by Bank of America Corp, despite the global financial market turmoil, investors' optimistic views on US technology giants have not weakened.Expectations for a soft landing of the economy have reached 76%, up from 68% in July.。

Scott Rubner, Managing Director at Goldman Sachs Group, stated that the stock market will hit record highs in the next 4 weeks before entering a downturn. About 50% of companies will enter the lock-up period from September 13, during which many stocks are expected to be bought.

Rubner expects the S&P500 index to hit record highs by the end of the year. The target price is 6,000, representing a 7% increase from the current level. He added that in November and December, the S&P500 index is likely to hit record highs in the fourth quarter. Additionally, after the US presidential election in early November, a record $7.3 trillion in US MMFs is expected to flow into stocks and bonds.

However, since the selling wave in early August, volumes have been generally decreasing, indicating lingering market concerns.

Nicholas Colas, Co-Founder of research firm DataTrek Research, pointed out, "It is essential to respect market uncertainty until the Volatility Index (VIX) stabilizes below 19.5 (long-term average)."

JPMorgan believes that the selling in early August is just a precursor to what may happen in the stock market, and they think there is a possibility of continued selling in the future due to concerns about economic growth.

Barry Bannister, a strategist at the U.S. major investment bank Stifel, also urged investors to adopt a cautious stance.

He mentioned that if the economic slowdown continues and eventually falls into a recession, bearish market may come as inflation remains high, and he expects the S&P 500 index to fall to 5,000 by October.

Federal Reserve Chairman Powell is expected to hint at a rate cut in September during his keynote speech on the 23rd at the annual symposium hosted by the Federal Reserve Bank of Kansas City (Jackson Hole meeting). In recent years, whenever Chairman Powell has spoken at Jackson Hole, the U.S. stock market has often experienced significant shocks. Currently, the options market is anticipating a 1% or more movement in the S&P 500 index on the 23rd.

Source: Bloomberg, moomoo
This article uses automatic translation in part.
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