The U.S. Federal Reserve Board Chairman Jerome Powell recently announced that interest rates will remain unchanged, quelling concerns of a possible rate cut that typically signals economic trouble. According to Bespoke’s Paul Hickey, the current stock market rally is being primarily driven by artificial intelligence excitement, rather than the need for a rate cut from the Fed.
While many investors are eagerly awaiting a rate cut from the Federal Reserve this year, Hickey cautioned that this may not necessarily lead to the market boost that some are hoping for. He noted that a rate cut usually indicates economic challenges rather than positive trends, and could even signify a significant economic slowdown.
Despite the anticipation for a Fed rate cut, Hickey pointed out that the current market performance, with major U.S. indices reaching all-time highs, has little to do with central bank actions. He highlighted that recent stock market gains are more likely due to the influence of artificial intelligence, with developments like ChatGPT’s announcement in late 2022 playing a significant role in the rally.
Looking ahead, Hickey suggested that earnings reports may pose a greater risk to the stock rally than the absence of a Fed rate cut. He pointed to market reactions during last week’s earnings reporting as an indication that the stock market’s performance may be more closely tied to company performance rather than central bank policies.
In summary, while some investors are hoping for a Fed rate cut to boost the economy and stock market, it may not necessarily lead to positive results as it usually indicates economic challenges rather than positive trends. Instead, recent stock market gains have been driven by artificial intelligence and its developments such as ChatGPT’s announcement in late 2022 have played a significant role in it.
Moving forward, earnings reports may pose a greater risk to the stock rally than expected interest rates as they could indicate how well companies are performing and how they are adapting to changing market conditions.
