Stocks are trading near record highs, as inflation shows new signs of receding. Can it last?

The market has been on a tear in 2024, driven higher by robust corporate earnings and the artificial intelligence boom. That rally has been challenged in recent months by a slew of hotter-than-expected inflation reports and economic data

The assertion that the market has been on a tear in 2024, propelled by strong corporate earnings and the AI boom, is not without its contradictions. Recent inflation reports and economic data have indeed raised significant concerns that the Federal Reserve might delay rate cuts longer than expected, potentially impacting the market adversely.

Still, the Fed held interest rates steady on Wednesday and signaled just one cut for this year, fewer than the three it previously projected. Traders expect the Fed to begin easing rates in September at the earliest, according to the CME FedWatch Tool.

While the S&P 500 and Nasdaq Composite indexes did achieve several record closes last week on the back of cooler-than-expected May Consumer and Producer Price Index reports, suggesting hopes that inflation might be easing again, this does not provide sufficient evidence of market stability or resilience to future changes. Such short-term successes could be fleeting, especially considering potential variables in the global economy and central bank policies.

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