Fed Rate Cut Is Not the Primary Driver of Stock Market Rally, Says Bespoke’s Paul Hickey
Investors eagerly awaiting a Federal Reserve rate cut this year might be disappointed, as it may not have the desired effect on the market, according to Bespoke co-founder Paul Hickey. He warned investors to “be careful what you wish for,” pointing out that rate cuts are typically implemented during challenging economic times. While some analysts believe a rate cut could indicate a successful soft landing for the economy, others predict it may lead to an economic slowdown.
The stock market rally seems to be unaffected by the possibility of a rate cut. Hickey believes that artificial intelligence (AI) mania is the primary driving factor behind the rally, rather than the actions of the Federal Reserve. He noted that major US indices have reached all-time highs this year, with the S&P 500 expected to surge even higher.
Hickey stated that the recent Fed meeting, which seemingly ruled out a rate cut, coincided with the market’s best week of the year. This observation leads him to question the true catalyst of the market’s rally. In his view, the market’s performance is largely influenced by the rise of AI, specifically citing ChatGPT’s announcement in late 2022 as the starting point of the rally.
While the absence of a rate cut may not hinder the stock market rally, Hickey pointed out that earnings present a bigger risk. He observed the stock market’s reaction during last week’s earnings reporting and highlighted the potential impact on the ongoing rally.
As investors continue to monitor the actions of the Federal Reserve, it is clear that the stock market is driven by more than just potential rate cuts. AI’s influence remains a significant factor, and attention should also be paid to earnings as they play a crucial role in the market’s performance.
Analyst comment
This news can be classified as neutral. The analyst suggests that the stock market rally is primarily driven by artificial intelligence (AI) rather than the potential rate cut by the Federal Reserve. The market’s performance may continue to be influenced by AI advancements, but investors should also pay attention to earnings, which could affect the ongoing rally.