Over the past year, the U.S. stock market has experienced a significant upward trend, driven by the surge in artificial-intelligence technology and optimism surrounding potential interest rate cuts by the Federal Reserve. However, recent market volatility has raised concerns among investors.
Last month, the S&P 500 recorded its worst one-day loss since 2022, signaling a shift in market sentiment. Fear among U.S. stock investors reached its highest level in months, reflecting uncertainty in the market.
The turbulence can be attributed to doubts about whether Big Tech companies can meet the high profit expectations set for them following their substantial stock price increases. Additionally, the market is transitioning to a phase where actual performance will dictate stock movements, rather than just expectations of rate cuts.
Market analysts anticipate that the Federal Reserve will begin cutting interest rates in September, with expectations of multiple rate cuts over the next year. However, concerns about inflation persist, which could potentially delay the pace of rate cuts.
Global central banks are also making policy adjustments, with the Bank of Japan signaling a potential increase in rates while others consider rate cuts. The upcoming U.S. election adds another layer of uncertainty to market dynamics.
According to strategists at BlackRock Investment Institute, the recent bouts of volatility may become a defining characteristic of the current macroeconomic and market environment.
