Complete Bull

What’s going on?

The stock market didn’t just ignore the bearish forecasts in the first half of the year: it decided to run with the bulls.

What does this mean?

Analysts were in a serious funk when 2023 first rolled around, predicting a bear market and warning of a looming recession. But it looks like the S&P 500 decided to prove them wrong. See, it’s not just up a bit: it climbed a staggering 16% in the first half of the year, roaring past many pundits’ full-year predictions. 

One driver of that has been the boom in AI: after all, it lit a fire under tech stocks, including the likes of Nvidia and Microsoft, and that’s warmed the entire market. It also doesn’t hurt that the US economy is trundling along much better than anyone expected, with solid, upwardly revised 2% growth in the first quarter helping to keep those recession whispers quiet.

Why should I care?

The bigger picture: No crystal ball.

This rally is a reminder that expert predictions, while often insightful, are still just predictions – and this year, they didn’t quite hit the mark. Stocks have proven to be more than a reliable guard against inflation too, outpacing the rate of price rises. And that’s no shocker: a lot of canny companies have managed to foist cost increases onto customers, cushioning the blow to their own profit margins.

For markets: Later or later.

With inflation coming down, investors have been hoping that stock-boosting interest rate cuts could be on the cards sooner or later. But this week the Federal Reserve essentially trashed any prospects of that “sooner” option: the central bank signaled that it’s planning to keep on hiking rates in a bid to fully stamp out price pressures – despite pausing hikes just last month. And that nasty little surprise could make it hard for stocks to continue their upward march.

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Originally Posted July 6, 2023 – Complete Bull