Wall Street sign (photo: Vlad Lazarenko)
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Will markets keep up gains this year?

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The US and European stock market rallies will continue, despite the US central bank perhaps not cutting rates at all until 2025, according to the CEO of a leading independent financial advisory and fintech.

Stocks climbed for a third week amid strong earnings growth, especially in AI-focused companies, as investors await the US inflation report on Wednesday.

“Despite ongoing geopolitical risks, elections, the impact of economies moving at different clips, and attention on central banks’ paths to begin rate-cutting, we currently expect the high stock valuations to continue for the rest of 2024,” said Nigel Green of deVere Group.

He cites two narratives to support his analysis.

“First, is the expectation of sustained economic growth. The recent upward revisions in global economic forecasts by institutions such as the IMF and Bloomberg serve as additional fuel for the optimism fire.

“At the heart of the bullish sentiment lies the resilience of the US economy. Key indicators, including consumer spending, job creation and corporate earnings, paint a picture of a nation on the path to continued growth. This robust performance serves as the backbone of confidence, instilling trust among investors in the stability and strength of the world’s largest economy.

China and Europe

“In parallel, signs of a rebound in China, the world’s second-largest economy, and Europe beginning to shine, further adds buoyancy to the global economic outlook.”

The deVere CEO added that the second narrative supporting the expectation of a continued stock market rally revolves around the anticipation of interest rate cuts in response to a potential economic slowdown.

“Should this happen, and central banks cut rates in response, this would also be expected to bolster equities,” Green said.

As the expectation of stock market rallies continues, savvy investors are likely to adopt strategic approaches to capitalise on the upward momentum while side-stepping potential risks.

“Of course, investors will want a piece of the action. However, they must still ensure portfolios are diversified, conduct selective stock picking, monitor valuations, implement risk management strategies, stay informed, and maintain a long-term perspective.”

April’s US consumer price index (CPI) report is due out on Wednesday, with traders hoping that a return to rate hikes is largely off the table for the Federal Reserve despite a recent slew of hotter-than-expected inflation data.

Green concluded that both narratives point to a likely continuation of stock market gains.

“Investors will not want to miss out, and, sensibly, will be topping up their portfolios. But they must do so judiciously and with guidance from financial advisors.”