Nvidia's market cap reached new heights, surpassing Microsoft and Apple and driving the S&P 500 to new records. The author questions whether this rally can be sustained and compares it to the Bitcoin hype of 2021/2022.

Last week, the Federal Reserve hinted at just one rate cut by year-end, likely in November or December, as inflation slows but stays above 3%. Despite mixed economic data, the S&P 500 and Nasdaq hit new highs, driven by optimism around AI and solid earnings.

Last week's focus was on economic weakness, evident in two key areas: the revised first-quarter gross domestic product (GDP) figures and several bond auctions. Additionally, elevated inflation has persisted for over three years, with the last reading below 3% occurring in April 2021 (2.6%). While 3% may not seem significant, we experienced an annual inflation rate between 7% and 9.1% from December 2021 through November 2022, peaking at 9.1% in June 2022.

Markets started the week quietly before turmoil hit midweek due to strong jobs and manufacturing data, coupled with Fed minutes hinting at prolonged high rates, causing the Dow's worst day this year. Despite a modest recovery on Friday, uncertainty looms with upcoming PCE data potentially adding volatility and the 10-year Treasury yield stuck at 4.5%.

This week's market commentary highlights the contrasting forces at play. While stock markets hit new highs on hopes of inflation subsiding and potential rate cuts, inflation data remains stubbornly high. The Federal Reserve's response to inflation will be key in determining the market's future trajectory.

The end of last week was a classic example of being rewarded for time in the markets and not caving in to emotions or market timing. Are there still concerns? Sure. Are markets being pushed higher by a small group of stocks? Yes!

Market highs got you nervous?

Relax, we've got your back. The Fed, inflation, and world events might stir the pot, but here's the truth: markets crave progress, and yours can too!

The S&P 500's record highs have investors wondering: diamond or bust?

Strong jobs and resilient consumer spending paint a rosy picture, but Fed Chair Powell's hawkish stance and conflicting economic data raise concerns. Is this a "high-pressure economy" forging a robust market, or a bubble primed to burst?

After a rough first couple of weeks to open 2024, markets have been ripping the past week and a half. We’ve settled into an interesting environment where the talk has gone from a hard landing, recession and four rate hikes in 2023 to a soft landing and six possible rate cuts in 2024.

The consumer hasn’t gotten tired of spending — at least not yet. December retail sales, released last Wednesday, were strong and easily exceeded expectations. The latest consumer sentiment number also came out last week, jumping to its highest level in nearly three years.

Markets continued to climb back toward end-of-July highs last week. After the Federal Reserve’s last meeting and a softer jobs number indicated a slowing economy, markets began to look for additional confirmation of easing inflation. That arrived with a flourish last week (more in the next section) and all but sealed the end of additional interest rate hikes.

Despite the conflict in Israel, markets rallied early last week, and the potential for added turmoil in the Middle East had not had any measurable impact on the markets through the middle of the week.

Markets continued to slump last week as bond rates hit levels we haven’t seen in 16 years. Suddenly, a five-year treasury yielding 4.7% isn’t so bad when compared to the volatility of the stock market.

Now that summer is winding down and we’re beginning to look forward to the fall, the overall mood (and the weather) needs an adjustment. Markets are in a mood and have begun to traffic in rumor and innuendo with the combination of a dismal news cycle, scant data, higher gas prices and stubborn inflation.

Fitch Ratings downgraded the United States’ long-term foreign-currency issuer default rating from AAA to AA+ last Tuesday, removing the “negative” rating watch and assigning a “stable outlook” label instead. (It’s like saying we were a shaky No. 1 but now a solid No. 2.) The downgrade is most likely a result of the most recent debt ceiling standoff and stopped the markets dead in their tracks.

Data released late last week seemed to back up Powell’s statements. The first reading of second-quarter gross domestic product (GDP) was released just after the Fed’s meeting. The U.S. economy grew by 2.4% in the second quarter, up from 2.0% in the first quarter and above expectations of 1.8%. Meanwhile, durable goods orders jumped 4.7% in June.

Last week was a strong one for the market, even though corporate earnings were mixed. (More on this in the next section.) Overall, the Dow Jones Industrial Average (DJIA) closed at new yearly highs on Friday at 35,227.69. The S&P 500 followed suit most of the week, up 18% for the year before sliding off to end the week.

Markets have priced in two more hikes, a brief pause and then cuts. But what the markets have overlooked is the possibility of rates staying “higher for longer,” which is beginning to be a more likely possibility.

Federal Reserve Chairman Jerome Powell doubled down on talk of additional, consecutive interest rate increases in the coming months — forecasting a potential half-percentage-point increase through the end of 2023 as the Fed had implied at its June meeting.