No Interest Rate Cuts Coming Soon

US stock markets continue to march higher, even after the latest inflation print showed that the path to reaching the inflation target could take longer than investors and officials had hoped for. The US S&P 500 and Nasdaq are up 5.41% and 5.92% in 2024, respectively, while Canada’s S&P/TSX has only added 1.18%.

The latest US inflation data showed a 3.1% increase in the level of prices compared to the same month last year, moving closer to the central bank's 2% target. However, as many have suggested, this progress is slow and painful, possibly leading the central bank to delay further interest rate cuts.

The markets had been anticipating faster rate cuts, and this anticipation sent stock markets skyrocketing. Currently, there is widespread hope for at least the original three rate cuts suggested by the Federal Reserve, lowering rates from 5.5% to 4.75% by the end of 2024. The inflation report caused some turbulence, especially for the rapidly growing significant seven, but soon these concerns were shrugged off, and stock indices hit another all-time high.

This week, the magnificent seven were not the sole driver of the gains. As more companies reported their fourth-quarter 2023 earnings, investors saw much better-than-expected results from a broad range of US companies, justifying high valuations.

The markets were worried that higher rates would affect the profitability of companies, but so far, corporate America has continued to deliver on expectations.