Stock Market Soars Despite Shutdown; AI Boom Drives Growth
Despite the ongoing U.S. government shutdown, both the S&P 500 and Dow Jones Industrial Average have reached all-time highs. The shutdown's impact on the stock market has been minimal, with speculative stocks performing exceptionally well in recent months.
The S&P 500 is currently at its most expensive level since the 2000 dot-com bubble, according to a measure popularized by Nobel-winning economist Robert Shiller. For stocks to appear less expensive, either prices need to decrease, or corporate profits need to increase significantly. The upcoming profit reporting season is crucial for maintaining market optimism.
The AI boom, led by companies like Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, Saudi Aramco, Broadcom, DSMC, and Tesla, is expected to drive economic growth and keep long-term interest rates and inflation worries at bay. The Russell 2000 index of smaller stocks has also set a record, taking nearly four years to reach its prior peak.
Despite the market's recent surge, many professional investors anticipate further growth. The Federal Reserve is expected to cut interest rates at least three more times by mid-2024, but Chair Jerome Powell has warned of potential changes due to persistent inflation. Meanwhile, gold has hit a record high, and the most popular U.S. bond fund is on track for its best year in at least five, indicating a diverse range of investments performing well.
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