US stock futures flat as Wall St cools amid anxiety over rates, inflation - The Stock Market News (2024)

FAQs

What is the stock market forecast for 2025? ›

That suggests the S&P 500 could trade to 6,000 by August 2025, and to as high as 6,150 by November 2025. But in the short-term, amid the ongoing weakness in stocks, Suttmeier said investors should keep an eye on potential support levels for the S&P 500 at 5,000 as well as a range from 4,600 to 4,800.

How Does Inflation Affect Stocks? Inflation hurts stocks overall because consumer spending drops. Value stocks may do well because their prices haven't kept up with their peers. Growth stocks tend to be shunned by investors.

A rising CPI may indicate robust economic growth and heightened demand for goods and services, positively impacting the overall stock market. Conversely, a declining CPI might suggest an economic slowdown or potential deflationary pressures, negatively impacting the overall stock market.

Higher interest rates tend to negatively affect earnings and stock prices (often with the exception of the financial sector). Changes in the interest rate tend to impact the stock market quickly but often have a lagged effect on other key economic sectors such as mortgages and auto loans.

U.S. stock returns: 2023 optimism carries forward

This heightened optimism is on par with the positive outlook in December 2021, when investors anticipated a 6% stock market return for 2022. Investor expectations for stock returns over the long run (defined as the next 10 years) rose slightly to 7.2%.

Stock prices have surged significantly over the past 18 months. The S&P 500 is up by 45% since it bottomed out in October 2022, while the tech-heavy Nasdaq has soared by a whopping 58% in that time. Investing now, then, means paying much higher prices than you would if you'd bought a year or two ago.

Cash, fixed-rate bonds and certain types of stocks are generally seen as poor investment choices during high inflation.

Candidates come from utility stocks, consumer staples and healthcare, defensive sectors that tend to fare well in inflationary or recessionary environments. This is because there is a steady demand for their products regardless of economic conditions. Strong price performance.

The market price of value stocks is usually directly proportional to the rate of inflation. Therefore, when the inflation rate rises, value stocks tend to perform better. On the other hand, Growth stocks have minimal cash flows. Therefore, they have a negative correlation with the rate of inflation.

Stock markets typically aren't moved as much by CPI data, but can be since higher interest rates can cause business activity to slow. In general stock markets prefer a lower CPI that allows consumers to keep spending, and business to continue investing.

Is high CPI bullish or bearish? ›

It is a key way to measure changes in purchasing trends and inflation. A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.

Not seasonally adjusted CPI measures

The Consumer Price Index for All Urban Consumers (CPI-U) increased 3.5 percent over the last 12 months to an index level of 312.332 (1982-84=100). For the month, the index increased 0.6 percent prior to seasonal adjustment.

Cyclical stock sectors

The consumer discretionary, technology, real estate, and financial sectors have historically been especially likely to outperform the market when rates fall and earnings rise. Financial stocks look particularly appealing, due to how inexpensive they've recently been.

Financials First. The financial sector has historically been among the most sensitive to changes in interest rates. With profit margins that actually expand as rates climb, entities like banks, insurance companies, brokerage firms, and money managers generally benefit from higher interest rates.

When rates go up, bond prices typically go down, and when interest rates decline, bond prices typically rise. This is a fundamental principle of bond investing, which leaves investors exposed to interest rate risk—the risk that an investment's value will fluctuate due to changes in interest rates.

Fortunately, analysts see positive earnings and revenue growth for all eleven market sectors this year. The healthcare sector is expected to generate a market-leading 17.8% earnings growth in 2024, while the information technology sector is expected to lead the way with 9.3% revenue growth.

The AI-fueled stock market bubble will burst in 2026, according to Capital Economics. The research firm said rising interest rates and higher inflation will weigh down equity valuations. "We suspect that the bubble will ultimately burst beyond the end of next year, causing a correction in valuations."

1. Positive returns -- but smaller than in 2023. I think that the overall stock market will deliver positive returns in 2024. However, I expect those returns to be somewhat smaller than they were last year.