US Stocks Rally to Begin the Year
Benchmark indices like the S&P 500 have increased this year, which has been good for the US stock market. This is a striking change from the sentiment among investors only a few weeks ago, when they were concerned about rising interest rates and the prospect of a recession.
Up 6% so far in 2023 for the S&P 500
The worst year for the S&P 500 index since the 2008 economic crisis, 2020 saw a 17% decline. In 2023, the index has increased by over 6%. Expectations that the Federal Reserve may start lowering interest rates this year as a result of slowing US inflation have been the main drivers of the rise.
The Rally May Not Last, Experts Warn
Market expert Jeremy Siegel recently forecast that the Dow Jones Industrial Average may fall by 1,000 points after the Fed boosts interest rates to fight inflation, while investor Michael Burry recently advised investors to “sell.” Jane Foley, a currency analyst at Rabobank, thinks that investors are overly optimistic about rate decreases and that central banks may need to maintain higher rates for a longer period of time.
Rate Cuts Are Predicted for Late 2023
Rate reductions, however, are still widely predicted by some in the market because the Fed may need to loosen policy to help the economy during a much-anticipated recession. The CME Group’s Fedwatch Tool demonstrates that money markets are reflecting investor expectations for rate decreases in late 2023 based on US interest-rate futures pricing. Philip Lee, chief economist at Investec, concurs that interest rates may be lowered in 2023 as a result of a recession in the developing world.
Experts Present Various Points of View
Karim Chedid of BlackRock iShares believes that the stock rebound this year is the result of investors following a well-known pattern in which the Fed loosens its control over inflation to support falling shares. According to Mike Wilson, chief equities strategist at Morgan Stanley, the rise is unlikely to continue and investors appear to have forgotten the adage “Don’t fight the Fed.”