The equity market commences the year in an exceptional manner, reminiscent of 1997 during Bill Clinton's presidency.
Investors continue to exhibit unwavering optimism, pushing the US stock market into uncharted waters. So far in 2024, the S&P 500 has notched 43 new record highs. This latest achievement on Monday boosted the index by 20.8% year-to-date, marking the strongest start to a year since 1997, in the midst of the dotcom boom under President Bill Clinton.
The recent success can be attributed to growing optimism surrounding a potential soft landing for the US economy.
Invesco's chief global market strategist, Kristina Hooper, highlights the "impressive" market performance, attributing it to the "resilience" in the US economy and excitement over potential rate cuts by the Fed.
However, there are underlying worries too. The start of October, a historically weak month, has been met with pessimism.
Wall Street started October on a sour note, with stocks dipping as a result of White House warnings that Iran could soon launch an imminent ballistic missile attack. This alert triggered a spike in oil prices.
Michael Block, co-founder and COO of AgentSmyth, stated, "The Iran report is what's scaring everyone right now."
The tech sector suffered a blow as well, with stocks like Nvidia taking a hit due to the feared impact of a powerful typhoon heading towards Taiwan, potentially disrupting the supply of chips from the island.
Despite these concerns, the overall sentiment on Wall Street has drastically improved in just two months.
An unsettling jobs report in early August sparked fears of a recession and caused markets to plummet as popular trades imploded. However, the markets quickly bounced back, setting new highs.
Fear and Greed Index, a metric maintained by CNN, moved into "extreme greed" territory on Monday, indicating a significant shift from the "extreme fear" of August.
According to Block, the primary concern now is the fear of missing out, or FOMO.
"There's a fear of missing out on a rally, and that's driving a lot of activity," said Block.
Recession predictions have consistently proved incorrect.
Despite apprehensions that American consumers have reached their financial limits due to escalating living costs and interest rates, consumer spending has shown remarkable resilience. This is crucial, as consumer spending represents the primary driving force of the U.S. economy.
The Fed has emphasized its commitment to safeguarding the job market. The hefty interest rate cut announced by the central bank in the previous month was primarily aimed at preventing unemployment rates from climbing further.
"People keep saying another crisis will hit consumption — but that hasn't happened. US consumption is still robust," said Block.
Businesses are eagerly investing in the promising economic landscape, driven by the optimism about a potential soft landing for the US economy. Amidst these positive sentiments, there are concerns about potential disruptions, such as geopolitical tensions and natural disasters, which could impact investing decisions.
