There is no question that stocks have enjoyed a terrific rally since the end of October. That was when investors became convinced the Federal Reserve was done raising interest rates.
The Standard & Poor’s 500 is up 27 percent since its Oct. 27, 2023, closing low. It’s had 20 record closes this year alone.
The Nasdaq Composite Index is up 30.4% over the same time frame. The Nasdaq-100 Index is up 30%.
And the Russell 2000 Index is up 26.6%.
What’s coming now that the Fed has spoken
Fed Chairman Jerome Powell said on Wednesday the central bank still expects to cut rates this year, maybe as many as three times on the expectation inflation is sustainably on its way to 2% a year.
There seems to be a consensus that the first cut is coming in June.
And, of course, stocks shot up afterward.
If traders are right, is there a chance stocks will go, well, parabolic?
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If you search the Internet, you’ll find a loud cadre of prognosticators saying tech stocks are in a bubble, and a crash or at least a serious pullback is imminent.
Given the big rally since October, the concern is understandable.
So far, however, markets overall aren’t buying into the fears.
What one often hears is the enthusiasm for all things Artificial Intelligence. Bulls argue that the development of AI is the biggest change coming to technology since the Internet became real in the mid-1990s.
And AI may be setting off a bull run not unlike what we saw in the late 1990s.
2024 is also a Presidential election year, when stocks typically rise about 6%.
That helps explain why the Dow Jones Industrial Average and Standard & Poor’s 500 indices hit record highs on Thursday, The Nasdaq and Nasdaq-100 Index hit record closes on Friday.
It feeds into the interest in Reddit (RDDT) . The social media company went public at $34 late Wednesday, and its shares jumped 48% to $50.44 on Thursday, its first day of trading. But Friday, however, Reddit 8.8% to $46.
Spencer Platt/Getty Images
Perhaps the worst scenario one can find from people who have watched markets is voiced by Jeffrey Hirsch, editor-in-chief of The Stock Traders Almanac.
Hirsch believes stocks may be flat for the next few months because it’s time. Stocks typically see their best gains between November through April and pause until the fall, he notes.
Jon Markman, a Seattle financial planner who’s bullish for for the foreseeable future, likes small cap stocks generally and the iShares Russell 2000 exchange-trade fund (IWM) and energy shares for the rest of the year.
What’s coming this week
This week may offer a hint of what’s to come because investors and traders will have to make decisions largely absent of big, market-moving events. It’s a four-day week because U.S. markets will be closed on Friday for Good Friday.
So, if momentum is driving markets you should see it before Thursday, if only because institutional investors will buy what’s hot before trading ends for the first quarter. Which is Thursday.
More AI Stocks:
Meanwhile, there are a few earnings reports of note:
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GameStop (GME) , the world’s largest video-game retailer, due Tuesday.
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McCormick & Co. (MKC) , the big merchant of spices, also on Tuesday.
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Cruise line operator Carnival (CCL) on Wednesday.
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Walgreens Boots Alliance (WBA) , the big pharmacy chain. It was recently removed from the Dow and replaced by Amazon.com (AMZN) .
The one report investors should pay attention to
The Commerce Department releases its monthly Personal Consumption Expenditures Price Index report on Friday morning.
The PCE is the Fed’s favorite inflation indicator because it measures price changes on things people actually buy.
The con. sensus estimate is for the index to show a month-to-month increase of 0.4% in February down from 0.6% in January. The year-over-year rate likely rose slightly to 4.8%, projects FXStreet. That suggests, as Powell himself conceded last week, that the path to normalization in price gains will be bumpy.
Economists have been low side on inflation estimates lately. The surprisingly strong inflation numbers of late caused Jerome Powell to repeat his mantra that rate cuts will come when inflation is sustainably lower.
Wall Street took that to mean rates will come down. But as one analyst said last week, another high number creates a different conversation.
Keep an eye on bitcoin
There are many bitcoin enthusiasts who see bitcoin and crypto currencies soaring through the end of the year.
Bitcoin has scuffled a bit of late Yes, bitcoin has had a big year. It’s up 52.6% for the year as of Saturday.
But it has fallen nearly 12% since its record close of $73,463 on March 13.
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