US stock markets have remained bullish in the face of deepening domestic and international risks, owing to three key factors. But with two of these coming under pressure, the durability of the current cycle will depend on the third: the US Federal Reserve.
CAMBRIDGE – Investors in US markets over the past year have shown a remarkable ability to brush off domestic and external risks to the economy’s well-being, as well as to the functioning of the global economic, financial, and trading system. This decoupling of risk from market sentiment has been driven by three factors: faith in the “sky-is-the-limit” prospects of certain technology firms, widespread confidence in American economic exceptionalism, and enduring faith in the US Federal Reserve to support financial assets. But two of these factors have lately come under pressure, leaving the durability of any positive outlook more dependent on the third.
CAMBRIDGE – Investors in US markets over the past year have shown a remarkable ability to brush off domestic and external risks to the economy’s well-being, as well as to the functioning of the global economic, financial, and trading system. This decoupling of risk from market sentiment has been driven by three factors: faith in the “sky-is-the-limit” prospects of certain technology firms, widespread confidence in American economic exceptionalism, and enduring faith in the US Federal Reserve to support financial assets. But two of these factors have lately come under pressure, leaving the durability of any positive outlook more dependent on the third.