RBC Capital Markets Raises Target from 5200 to 5500
"Overbought Zone... Watching Exit" Caution
February PCE Inflation Key to Fed Rate Path
The US stock market rally in New York has increased the value of US stocks by $4 trillion (approximately 5,400 trillion KRW) in the first quarter of this year. Wall Street has been raising its annual stock market forecasts one after another. Amid optimistic and bearish views on further rises in the US stock market, inflation indicators that will influence the Federal Reserve's (Fed) interest rate path are expected to become a key variable for the US stock market.
On the 28th (local time), RBC Capital Markets raised its year-end forecast for the S&P 500 index to 5300 from the previous 5150.
Lori Calvasina, Head of US Equity Strategy at RBC Capital Markets, stated, "Ultimately, it is the market’s perspective, rather than economists’ or strategists’ views on where economic fundamentals are headed, that determines stock prices."
Earlier, Oppenheimer Asset Management also raised its year-end S&P 500 index forecast from 5200 to 5500, citing a resilient economy and the Fed’s effective monetary policy as the basis for the upward revision. HSBC raised its forecast from 5000 to 5400 based on a soft landing outlook, and Soci?t? G?n?rale increased its S&P 500 forecast from 4750 to 5500, citing improved corporate earnings and the artificial intelligence (AI) boom.
The US stock market closed this quarter with a strong rally. The S&P 500 index surged 10.2% in the first quarter, marking the largest quarterly gain in five years since the first quarter of 2019 (13.1%). The Dow Jones Industrial Average rose 5.6% during the same period, its biggest increase since the first quarter of 2021 (7.4%). The Nasdaq index jumped 9.1% in the first quarter. According to Bloomberg, the surge in the three major New York stock indices increased the value of US stocks by $4 trillion in the first quarter. Nvidia, the AI leader and superstar of the New York stock market, soared 83% in the first quarter alone.
The three major indices also showed notable gains on a monthly basis. The S&P 500 index rose 3.1% this month, while the Dow Jones Industrial Average and Nasdaq increased by 2.1% and 1.8%, respectively.
Whether the New York stock market continues this rally depends on the Fed’s future interest rate path, analysts say. At the Federal Open Market Committee (FOMC) meeting on the 20th, the Fed maintained its forecast for three rate cuts this year. For this forecast to materialize amid a robust US economy and employment, a continuous slowdown in inflation indicators must be confirmed. The market is closely watching the personal consumption expenditures (PCE) price index, the Fed’s most important inflation gauge, which will be released on the 29th. The core PCE price index for February is expected to rise 2.8% year-over-year, maintaining the same level as in January.
Jeremy Straub, CEO of Coastal Wealth, predicted, "If the PCE price index released on the 29th meets or comes close to expectations, the Fed is highly likely to cut interest rates three times this year."
According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on this day reflects a more than 63% probability that the Fed will cut rates by 0.25 percentage points at the June FOMC meeting, slightly down from the 70% range a week ago.
Meanwhile, concerns are growing that a bubble has formed in the US stock market, creating significant downward pressure.
Dan Wontrobsky, analyst at investment firm Janney Montgomery Scott, warned, "For now, we shouldn’t go against the trend, but inflation remains stubborn, macro uncertainties are rising, and the stock market is still overbought. At the very least, we need to keep watching for an exit."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
