The US stock market has been on a seemingly unstoppable wave of growth in recent months. With the Federal Reserve indicating its intent to keep interest rates low, investors have flooded into the market and driven stocks ever higher. But what are the forces behind this surge? What’s driving the bull market? And how long can it be sustained? In this blog post, we will explore the forces driving US stocks higher and consider what could bring an end to the current bull run. Read on to learn more about US stocks and where they may be headed in the future.
The Fed’s decision to leave interest rates unchanged
When the Federal Reserve announced its decision to leave interest rates unchanged on Wednesday, it was a move that caught many by surprise. However, it was a decision that ultimately drove stocks sharply higher.
The Fed’s decision to keep rates steady signaled that it is still concerned about the health of the economy and is willing to continue to provide support. This was welcomed news by investors who pushed stocks higher in response.
The market has been on a tear lately, with the Dow Jones Industrial Average hitting new highs and the S&P 500 index flirting with its own record. The Fed’s decision gives investors another reason to be bullish on stocks and the market looks poised to continue its march higher.
Stocks rally on the news
The Dow Jones Industrial Average surged 300 points on Thursday after the Federal Reserve signaled it could start cutting interest rates as soon as next month.
The central bank’s dovish shift sent a strong signal to investors that it is ready to act to support the economy if needed. The Fed’s rate cut prospects have been a major driver of the stock market’s rally this year.
Thursday’s gains put the Dow up nearly 18% for the year. The S&P 500 and Nasdaq are also up double digits in 2019. All three indexes are on track for their best annual performance since 2013.
The market’s reaction to the Fed’s statement
The Fed’s statement on interest rates was well received by the stock market, with indexes soaring on the news. The Dow Jones Industrial Average rose 1.3%, while the S&P 500 and Nasdaq Composite both gained around 1%.
The central bank left interest rates unchanged but signaled that it could start raising rates sooner than expected. The Fed also said it would begin reducing its $4.5 trillion balance sheet in October.
Investors had been worried that the Fed might start unwinding its stimulus measures too soon, which could have hurt economic growth and equity prices. But the central bank’s comments reassured markets that it is still committed to supporting the recovery.
What the Fed’s decision means for the future of the market
The Federal Reserve’s decision to keep interest rates unchanged was a dovish move that caught many market participants by surprise. The Fed’s dot plot showed that there was significant support for another rate hike in 2016, but Chair Janet Yellen said that the case for a rate hike has weakened in recent months. This shift in tone sent stocks soaring as investors bet that the Fed would be on hold for longer than previously expected.
So what does this mean for the future of the market? For one, it means that the bull market is likely to continue as long as the Fed remains on hold. Low interest rates are generally seen as being supportive of equity prices, and with the Fed signaling its intention to keep rates low for the foreseeable future, it’s likely that stocks will continue to climb higher. Additionally, this could also mean more M&A activity as companies look to take advantage of cheap financing costs. And finally, it means that bond yields are likely to stay low, which could eventually lead to more investors chasing yield in riskier assets such as high-yield bonds and dividend stocks.
