U.S. Stocks Eye New Highs as Fed Rate Cut Bets Persist

All three major U.S. indexes notched new record highs on March 21st, propelled by optimism spurred by Federal Reserve Chair Jerome Powell stating that the central bank stayed on track for three interest rate cuts this year and affirmed that solid economic growth will continue.

Federal Reserve Chiar Jerome Powell stated that the timing of those reductions still depends on officials becoming more confident that inflation will continue to decline towards the Fed's 2% target even as the economy continues to outperform expectations. Powell was speaking following a policy meeting at which officials maintained their outlook for three cuts in borrowing costs this year and left the benchmark overnight interest rate in the 5.25%–5.50% range.

With the bulls dominating the market so far this year, the record-breaking rally in U.S. stocks was led by these major contributors:

As U.S. stocks sustain their vigorous rally, an increasing number of Wall Street investment banks are adopting bullish stances.

A day after the index SPX logged its 19th record close of 2024, Société Générale analysts raised their year-end objective to 5,500 from 4,750 a day, implying further upside of little over 5% from this point. This is the most optimistic target among Wall Street’s biggest banks, according to MarketWatch.

Société Générale stated in the report that the continued rise in U.S. equities is supported by a solid macroeconomic foundation and robust corporate profit growth in the U.S. Analyst from the French Bank believes there are three macroeconomic themes bolstering this view.

Firstly, the "reshoring wave" refers to the trend of U.S. companies relocating businesses or production lines back to domestic territory. This has encouraged local manufacturing and contributed to America's "reindustrialization."

Secondly, the "AI wave." Société Générale posits that without the push from the artificial intelligence boom, the S&P 500 might have only reached around 4,400 points.

Lastly, "credit improvement." With recent enhancements in the U.S. credit environment and lending standards. The bank maintains an optimistic outlook on the American financial sector.
However, this uptrend in the U.S. stock market has also prompted "bubble warnings" from Wall Street analysts, such as Bank of America's Chief Investment Strategist Michael Hartnett and JPMorgan's Chief Market Strategist Marko Kolanovic.

With inflation re-accelerating, growth a little soft, and risk assets unscathed, "that is very symptomatic of a bubble mentality," Hartnett said in a Bloomberg TV interview on March 14, highlighting the "Magnificent Seven" and the cryptocurrency sector.