Source: Golden Ten Data
Analysts said this cycle taught investors one thing, that is, things are changing very fast.
Investors seem impatient to wait for interest rate cuts.
The US Consumer Price Index (CPI) for April indicates that inflation may ease to a level that triggers the Federal Reserve to cut interest rates later this year, and the US stock market and bond market rebounded strongly after the data was released.
According to Dow Jones market data, the S&P 500 index recorded a new intraday record of more than 5,300 points and reached its 23rd closing high this year. In fact, the three major US stock indexes have further reached record highs. The Nasdaq Composite Index hit a new closing high for the second day in a row, while the Dow Jones Industrial Average surpassed the previous closing record at the end of March.
Garrett Melson, strategist at the French Foreign Trade Bank's investment management solutions, said on Wednesday, “I think FOMO (fear of missing out) will be a very big theme this year.” “Influencer stocks” such as GameStop (GME) and AMC Entertainment Holdings (AMC) suddenly showed sharp fluctuations again. This may be an “extreme” sign of the return of FOMO in the market, but Melson believes that investors now also seem less focused on inflation continuing to be far higher than the Fed's 2% target.
Although the housing portion of the April CPI inflation index and several other sectors looked “stubbornly strong,” Melson said the anti-inflation trend that began last year appears to be continuing.
He pointed out that the improvement in market sentiment since April, the “healthy rotation” of the stock market, and “still very strong” consumer data should all provide “enough room” for US stocks to continue to rise at a broad index level throughout the summer.
US bond yields fell sharply on Wednesday as investors re-entered the fixed income market, which boosted bond ETFs, including the popular iShares Core U.S. Aggregate bond ETF, which rose 0.7% to record its best one-day gain since 2024, according to Dow Jones market data. The yield on the benchmark 10-year US Treasury also fell back to 4.36% after hitting an annual high of around 4.7% in April.
Danny Zaid, portfolio manager at TwentyFour Asset Management, described the 3.4% annual inflation rate shown in Wednesday's CPI report as “a small step in the right direction.” “This is definitely an improvement on the previous three months (inflation) situation,” he said.
When talking about bond investment opportunities, Zaid said that US corporate credit has rebounded sharply, surpassing similar products in Europe. Major US corporate investment-grade bond indices have recently had spreads of 90 basis points compared to risk-free interest rates, while Europe-related indicators have differences of about 20 basis points.
“I don't think investors are being compensated enough for some parts of corporate credit in the US,” Zaid said. He added that on the margins, TwentyFour prefer European corporate credit. If the ECB switches to cutting interest rates in June as expected, European corporate credit will benefit.
He said that although the US economic data is better than the Eurozone, economic activity in Europe also “seems to be bottoming out. If there's anything we've learned from this cycle, it's that things are changing very, very fast.”
Editor/Jeffrey