USD: S&P 500 at 5000
US asset markets are having a good few weeks. Equity benchmarks are pushing up to fresh highs
and last night's US 10-year Treasury auction saw decent demand. Leading the charge in US
equities has been the big tech stocks. Just looking across the consensus price targets of the
'magnificent seven', the targets remain anywhere from 6% (AAPL) to 20% (AMZN) above last
night's closing levels. The only one of the seven with a lower price target is Nvidia, where this
year's 50% rally has overshot a price target largely there since last summer. Whether the
psychological 5000 level in the S&P 500 now proves something of a hurdle remains to be seen. But from the equity analyst community anyway, the consensus is that there is more to come.
After the Fed/Powell pushed back hard on a rate cut in March, and, the payrolls data
reinforced the message, the market's attention is shifting to the May meeting
probabilities.
We believe the Fed’s hiking cycle is complete and that the Fed will remain on hold at the current Fed funds rate range of 5.25-5.5% until the first 25bp cut in May,
after which we expect 25bp cuts in June, July, and September followed by quarterly
cuts until the terminal rate range reaches 3.25-3.5% in September 2025, although
the risks are skewed toward a June start to rate cuts. On balance sheet policy, we
expect the Fed to announce that it will start tapering the pace of balance sheet
runoff in May and to end runoff in 1Q25.
US asset markets are having a good few weeks. Equity benchmarks are pushing up to fresh highs
and last night's US 10-year Treasury auction saw decent demand. Leading the charge in US
equities has been the big tech stocks. Just looking across the consensus price targets of the
'magnificent seven', the targets remain anywhere from 6% (AAPL) to 20% (AMZN) above last
night's closing levels. The only one of the seven with a lower price target is Nvidia, where this
year's 50% rally has overshot a price target largely there since last summer. Whether the
psychological 5000 level in the S&P 500 now proves something of a hurdle remains to be seen. But from the equity analyst community anyway, the consensus is that there is more to come.
After the Fed/Powell pushed back hard on a rate cut in March, and, the payrolls data
reinforced the message, the market's attention is shifting to the May meeting
probabilities.
We believe the Fed’s hiking cycle is complete and that the Fed will remain on hold at the current Fed funds rate range of 5.25-5.5% until the first 25bp cut in May,
after which we expect 25bp cuts in June, July, and September followed by quarterly
cuts until the terminal rate range reaches 3.25-3.5% in September 2025, although
the risks are skewed toward a June start to rate cuts. On balance sheet policy, we
expect the Fed to announce that it will start tapering the pace of balance sheet
runoff in May and to end runoff in 1Q25.
