Trading has been choppy and range-bound in recent weeks, leaving investors feeling seasick. For now, we can’t expect anything more smooth sailing.
There is no shortage of headlines and stories, but the stock market is doing very little.of
S&P500 index
It has been flat for the past two months. Last week’s parade of inflation and retail sales data, tech company drama and industry conferences did little to change that. The S&P 500 fell 0.16%.
Dow Jones Industrial Average
Increased by 0.12%,
Nasdaq Composite
We lost 0.39%.
Even the Federal Open Market Committee meeting next week is unlikely to help determine the direction of the market. The data-dependent Federal Reserve is scheduled to meet on Tuesday and Wednesday to consider its next monetary policy move and provide forecasts for interest rates, economic growth and inflation. The futures market is pricing in no change in interest rates this time.
“The flow of data since the July meeting largely supports a wait-and-see attitude,” said Michael Gapen, chief U.S. economist at Bank of America. “The Fed should be encouraged by recent data that disinflation is underway, but we are concerned that strong economic activity could lead to a re-acceleration of inflation.”
But the Fed’s decision on its long-term trajectory is still up in the air. It will focus on the overview of economic forecasts, the so-called dot plot. Rising energy prices are once again fueling inflation, while economic growth continues to show unexpected upside and unemployment remains very low. The Fed’s fight against inflation doesn’t seem likely to end before the end of the year, and much attention will also be focused on Wednesday on where the midpoint of interest rates will land in 2024.
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For now, futures call for a rate cut of about 1 percentage point by the end of next year, but that forecast could change depending on what Fed officials collectively forecast this week.
What will happen to stocks this year? Binky Chadha, chief U.S. equities and global strategist at Deutsche Bank Securities, said the S&P 500 index “remains challenged due to unexpected upside in growth, but clouds of uncertainty remain. , supporting unstable price movements up to 4,750. The index closed at 4,450 on Friday.
“Continued turmoil” sounds like a good way to describe the near-term path of the market. The stock is expensive, but not terrible, and earnings growth is expected to be reasonably good. Economic indicators can look good or bad depending on how you look at them. And the Fed’s next move can be interpreted through a bullish or bearish lens, with rate hikes almost done but rate cuts still a long way off.
More reliable evidence of an upcoming recession or soft landing will be needed to establish a definitive uptrend or downtrend for stocks and bonds. Don’t put away the Dramamine just yet, because it could still be months before we find that evidence.
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Write destination Nicholas Jasinski, nicholas.jasinski@barrons.com
