Stock Market Continues to Rise, Fueled by Federal Reserve’s Financial Support
The corporate world is experiencing a significant boost in the economy, thanks to ample financial support from various sources. This aligns perfectly with the Federal Reserve’s objectives. The stock market, in response, has been on a remarkable upward trajectory. Notably, the S&P 500 stock index has seen a rise in 14 of the last 15 weeks, indicating promising growth. Surprisingly, these leading organizations are not solely responsible for this surge. It appears that the stock market is set to continue its ascent, with the Federal Reserve playing a crucial role in this success.
The Nasdaq Composite Index, which focuses on technology-driven companies, witnessed a substantial increase of 1.2% on Friday, resulting in a 6.5% rise so far in 2021. On the other hand, the Dow Jones Industrial Average experienced a minor setback, shedding 0.1% or about 55 points on Friday. Nevertheless, it maintains a year-to-date increase of 2.6%. As for the S&P 500, it concluded the week with a commendable 1.4% hike, reaching approximately 5027 points after a 0.6% climb on Friday. This particular index has achieved a remarkable 5.4% growth in 2024.
Interestingly, these indices have each enjoyed a rise in 14 of the past 15 weeks, a feat unseen since 1972 for the S&P 500 and the 1990s for the Dow Jones and Nasdaq. Evidently, the stock market is currently in excellent shape. But what exactly led to this remarkable achievement?
One major contributing factor is the abundance of money injected into the financial system. This influx of funds was initiated by the Federal Reserve to combat the economic repercussions caused by the Covid-19 pandemic and subsequent recession. While the Fed’s quantitative tightening policy did extract some money from the banking system, a significant amount remains in circulation. Under the guidance of Jerome Powell, the Federal Reserve has been implementing a monetary policy of quantitative tightening, ensuring that inflation remains under control without disrupting the economy or financial markets.
The recent release of an outstanding jobs report showcased the enduring strength of the labor market. In addition, corporate earnings have continued to grow despite a decrease in inflation. As a result, the prices of tech companies have remained resilient.
Moving forward, analysts have identified potential challenges within the banking sector, debt market, and commercial real estate. Some companies have expanded into financially precarious positions. However, it is expected that well-capitalized and stronger companies will capitalize on the weaknesses of their counterparts, absorbing them in the process. This will lead to more consolidated sector positions, with dominant players asserting their presence. The stock market is likely to continue its positive trajectory, supported by the Federal Reserve’s unwavering efforts.
Analyst comment
Positive news. The stock market is expected to continue rising due to the Federal Reserve’s financial support and strong corporate earnings. The Nasdaq and S&P 500 have experienced significant growth, while the Dow Jones remains stable. The stock market is in excellent shape, with potential challenges in the banking sector and commercial real estate to be overcome by stronger companies. Overall, the market is likely to continue its positive trajectory with the support of the Federal Reserve.
