Stock markets: Euphoria on Wall Street – S&P 500 on the way to an all-time high in 2024. US markets are betting on interest rate cuts.

Stock markets: Euphoria on Wall Street – S&P 500 on the way to an all-time high in 2024. US markets are betting on interest rate cuts.

According to a report from finanzmarktwelt.de, the mood on Wall Street has completely reversed, moving from panic in October to euphoria in December. The US stock markets are currently celebrating a big interest rate party and the leading index S&P 500 has reached a new annual high. A survey shows that the majority of market participants expect the S&P 500 to hit a new all-time high next year.

With inflation slowing significantly, markets no longer believe in the Fed's “higher interest rates for a longer period of time” narrative. Investors expect the rally on the stock markets to continue and the market-wide S&P 500 to reach a new all-time high next year. Market participants do not see inflation and recession as the biggest risks to markets, according to a Bloomberg survey. Instead, they are betting that price increases will continue to slow and the economy will have a soft landing.

According to a Bloomberg Markets Live Pulse survey, the S&P 500 index will hit a record high in 2024 as the US avoids slipping into recession. A median of 518 respondents expects the S&P 500 to climb to 4,808 points next year. Still, there are risks, with about 33% of survey respondents expecting an exhausted consumer to be the biggest risk to next year's rally. The median forecast in the survey calls for only an increase of about 4% from the current level of the S&P 500, which is significantly less than the 20% increase this year.

Nevertheless, the US stock markets remain the ultimate and are performing better than the rest of the world. Experts expect another all-time high as the S&P 500 has now adjusted to the higher interest rate environment. Technology stocks have dominated the market, but investors are now turning to other stocks, from small caps to value stocks. It remains to be seen whether the rally in the Magnificent Seven will continue over the long term or whether valuations will prove more attractive in other parts of the US market.

Overall, the facts show that US stock markets are outperforming their global peers, and the Fed's looming interest rate turnaround is expected to continue to support the rally. Nevertheless, it remains important to keep an eye on the potential risks, particularly as they relate to the consumer and stock valuations.