March has proven to be an eventful month for Wall Street, reminiscent of the heart-pounding highs and lows of a rollercoaster ride. The first half saw U.S. stock markets grappling with uncertainty, spurred by speculation around the Fed fund rate adjustments. This was driven by a sturdy labor market and persistent inflation rates through February.
However, the market seems to have found its rhythm again following the March FOMC meeting. The Federal Reserve opted to maintain the benchmark lending rate in the 5.25-5.5% range, a consistent stance held since July 2023. This rate stands as the loftiest seen in 23 years, anchoring Wall Street with a sense of history in the making.
The release of the Fed’s latest “dot-plot” is akin to deciphering intricate hieroglyphics – an anonymous revelation of projections from the 19 FOMC officials. It paints a picture of the benchmark lending rate potentially dipping to 4.625% by the mid-point of 2024, compared to the prevailing mid-point rate of 5.375%. This prophesies a series of three rate cuts, each chipping away 25 basis points.
Post the March FOMC verdict, the CME FedWatch tool shines a light on a 75% chance of witnessing the inaugural rate cut during the June FOMC meeting. A percentage that stood at a more modest 60% mere moments before Fed Chair Powell’s post-decision address.
The past week saw the iconic Dow shooting up by nearly 2%, a spectacle reminiscent of a phoenix rising from the ashes – marking its most impressive performance since December 2023. The broader market indexes – S&P 500 and Nasdaq Composite – weren’t far behind, with gains of 2.3% and 2.9% respectively, echoing a triumphant chorus across Wall Street.
Last week unfurled the curtain for the IPO stage with the debuts of Astera Labs Inc. (ALAB) and the enigmatic Reddit Inc. (RDDT). The advent of these tech behemoths marked the first venture-backed tech companies to break into the U.S. IPO market since the sepia-tinted September of 2023. Morgan Stanley (MS) took point as the lead conductor orchestrating these IPO symphonies.
This week holds its breath in anticipation of a slew of critical economic indicators. New Home Sales, Case-Shiller home prices, pending home sales, Consumer Confidence courtesy of conferences, University of Michigan’s venerable Consumer Sentiment Index, the Q4 2023 U.S. GDP’s swan song, and the crown jewel being the PCE and core-PCE inflation data from February – a crescendo of insights awaited with bated breath.
In the past month, prophecies have been aplenty from the sage minds of notable economists and financial maestros. Barclays raised the S&P 500’s target for the approaching 2024 to a staggering 5,300 from 4,800, alluding to the towering earnings of tech stalwarts. With a continuance of the tech giants’ saga in the forthcoming quarters, a bullish scenario is painted, with the benchmark potentially soaring to the clouds at 6,050.
Yardeni Research tossed its own divination into the mix, setting the year’s finale target for 2024 at 5,400. Beyond lies a vista of rising summits – 6,000 in 2025 and 6,500 in 2026, a tale of ascent written in the stars. Capital Economics added their voice to the chorus, painting a picture of the S&P 500 scaling the summit of 6,500 by the close of 2025 should the euphoria surrounding the realm of artificial intelligence – especially the captivating generative AI – continue to enchant.
In a world of myriad predictions, The Goldman Sachs Group Inc. GS adhered steadfastly to their conviction, holding firm to the S&P 500’s year-end 2024 forecast at 5,200. Yet, they whispered a tantalizing proposition of a bull case scenario, casting the benchmark skywards to a mesmerizing 6,000 by year’s end, contingent upon the titanic output of mega-cap tech entities.
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