Hey everyone,
I've been closely following the current economic indicators and I'm puzzled by the S&P 500 reaching new all-time highs. I broke up my logic into individual points:
The Consumer Price Index (CPI) and Inflation Forecasts indicate that inflation remains stubbornly high. High inflation typically reduces consumer purchasing power and can squeeze corporate profit margins, which university theory says that these should pressure stock prices downward. Is this no longer the case?
The Federal Reserve has as we all know raised interest rates to combat inflation the past year or so. Higher interest rates increase borrowing costs for both consumers and businesses, which slow economic growth and make equities less attractive compared to fixed-income investments. Now this often isn't reflected in financial statements right away, it takes time for the effects of interest rates to effect the bottomline. You don't really notice until you start paying the cumulative interest.
Wall Street has been saying there's a 50% chance of a 0.5 rate cut pricing it into the market if the Fed decides to pause or reverse its tightening measures. If the Fed doesn’t act as expected, this uncertainty could lead to a tremendous oopsie daisy that no one seems to be talking about. When has the Fed acted in the interest of the equities market? They work for the government.
Youth unemployment rates ain't looking so good and there's a rising sense of generational hopelessness present in pop culture and everyday narratives.High youth unemployment can lead to reduced consumer spending which is pretty surface level, but on a large scale, doesn't this also lead to a reduced savings rate, less investments and therefore less money flowing into companies who need to maintain a large price
Now obviously these are a few off the top of my head examples pointing to the negative so I'm asking you to offer a counter-argument.
Why do YOU believe the S&P 500 is continuing to climb to new heights?
Are strong corporate earnings or future growth expectations counterbalancing these negative factors?
Are there international developments or global market trends supporting the S&P 500's rise?
Is the anticipation of future rate cuts fueling buying behavior now?
Disclaimer: This is not financial advice. Please do your own research before making any investment decisions. Stonkz only go up
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