S&P 500 Nears Record High Amid Rate Cut Hopes

Last week, the financial world buzzed with excitement as both the Dow Jones Industrial Average and the Nasdaq 100 notched new record closing highs. Hot on their heels, the S&P 500 is flirting with history itself, edging ever closer to a peak of its own.

After wrapping up Tuesday’s session on an upswing, the index is just a whisker away—30 points, to be exact—from setting a fresh record, a feat that would require a modest uptick of 0.6%. Though S&P 500 futures saw a slight wobble in premarket action, it’s all up in the air until the markets actually open. The breakthrough could happen any moment, or it might take the seasonal spark of a year-end ‘Santa rally’ to nudge it over the finish line.

A Monetary Policy Pivot Fuels the Rally

A sea change in monetary policy outlook that began in late October has been the wind in the sails of a sweeping seven-week stock rally. The latest burst of energy emerged right after the Federal Reserve’s Open Market Committee got together, with Chair Jay Powell dropping some notable tidbits, including an updated inflation outlook and whispers of rate cuts down the line. Powell’s willingness to broach the subject of loosening the purse strings has sent a wave of hope through the markets, with traders recalibrating their future bets accordingly.

Leading the Pack: The ‘Magnificent Seven’

It’s impossible not to notice the impact of the ‘Magnificent Seven’—a squadron of tech and innovation giants, including Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla, on the S&P 500’s stellar run this year. Together, they have blazed ahead with a startling 75% surge, overshadowing the index’s overall modest 12% uptick. Their collective prowess has rocketed the S&P 500 to an enviable 25% year-to-date triumph.

The VIX, Wall Street’s renowned “fear gauge,” has dropped to its lowest levels since the pandemic upended our world, and this bull run has not only fattened wallets but also calmed nerves.

Peering into 2024: Varied Visions

With eyes trained on 2024, the prognosticators are out in force, offering a mixed bag of forecasts for the stock market. Analyst Damir Tokic is sporting rose-colored glasses, theorizing that the move away from stern monetary policy to the welcoming prospect of rate cuts could help us dodge a recession, which spells good news for stocks.

Echoing this optimism, Investing Group Leader Victor Dergunov envisions the possibility of even more gains on the horizon. Meanwhile, Zoltan Ban strikes a more cautious note, foreseeing potential turbulence for the S&P 500, with the possibility of a slide to 3,500 points amid challenges like rising oil prices and a slowing economy.

And there’s the Fear & Greed Trader, chiming in with a dose of caution about the infectious ‘fear of missing out‘ that’s creeping back among investors, hinting that history might just repeat itself and urging a watchful eye.