The stock market soared to new heights on Friday, as investors eagerly anticipate interest rate cuts by the Federal Reserve and strong corporate profits.
Driven by the performance of technology stocks, the S&P 500 reached a record level of 4,839, surpassing its previous closing high of 4,796 in January 2022. The Dow Jones Industrial Average also experienced a significant surge of nearly 400 points, while the Nasdaq Composite climbed by 1.7%.
"During the last peak of the stock market, the Federal Reserve had not yet implemented interest rate hikes to combat inflation," stated Greg McBride, the chief financial analyst for Bankrate. "Over the past two years, we have witnessed the most rapid pace of interest rate increases in four decades. Now, with inflation gradually returning to the target of 2%, all eyes are on when the Fed will begin reducing interest rates."
Economists at Goldman Sachs have predicted that the central bank will commence lowering its benchmark interest rate in March, with a total of five cuts expected throughout the year.
The investment bank predicts that the U.S. economy will experience a "soft landing," with a gradual slowdown in economic growth and a decrease in inflation throughout the year. According to Goldman, the central bank is expected to gradually lower interest rates, resulting in reduced borrowing costs for both consumers and businesses.
John Lynch, the chief investment strategist for Comerica Wealth Management, believes that strong corporate earnings and the anticipation of declining interest rates will drive the market to new highs in 2024.
