Stock futures were softer early Wednesday, not far below levels that would represent a fresh record for the S&P 500.
Futures showed the S&P 500 in line to open less than 1% shy of the record closing closing high of 4796.56 it recorded at the start of January 2022.
The benchmark has jumped 24.2% this year, partly powered by hopes that the economy has not been too badly damaged by the Federal Reserve’s ratcheting up of interest rates to cool inflation.
Fund managers now are at their most upbeat on the stock market in nearly two years, according to a survey by Bank of America.
The latest leg of the rally reflects hopes that with inflation back down to 3.1%, the central bank will begin quickly trimming borrowing costs next year.
Not even an apparently concerted effort by Fed officials to counter the market’s rate-cut optimism has damped trader’s ardor. This dismissal of less-dovish Fedspeak has left some observers bemused.
“Isn’t it amazing how investors ignore the hawkish Federal Reserve comments but fully embrace the dovish commentaries,” Swissquote Bank said.
“Investors are dreaming of aggressive rate cuts in an environment of strong economic growth, and that is not the right recipe for easing inflation and keeping it sufficiently low. The robust economic data and high earnings expectations are not compatible with a dovish Fed.”
Perhaps the current bullishness is also reflective of seasonal trends, with optimism about a festive bounce underpinning stocks.