Despite multiple threats to the US economy, an imminent port strike, inflationary pressure and an uncertain election campaign, investors continue to bet on a prosperous future.
For context, nearly 50,000 members of the International Longshoremen’s Association (ILA) are on strike against the country’s East and Gulf Coast ports. Cutting off the flow of many of America’s imports and exports.
In this regard, the president of the ILA, Harold Daggett, told CNN: «If we have to stay here for a month or two, this world collapses. Blame them. “Don’t blame me.”
By the way, depending on the duration of the strike, it could lead to shortages of consumer and industrial goods, which in turn could cause prices to rise. It could also be a setback for the economy, which has shown signs of recovery after pandemic-induced supply chain disruptions that caused inflation to rise.
Overflowing optimism: The market ignores the storms and reaches all-time highs
However, investors remain relentlessly optimistic, sending the US stock market further into uncharted territory. By the way, the S&P 500 has hit 43 all-time highs so far this year.
For example, the closing of the markets on Monday, September 30, marked an unprecedented milestone: the benchmark index registered a rise of 20.8% so far this year, surpassing any other start since 1997. This performance is reminiscent of the dotcom boom during Bill Clinton’s presidency, when the US economy experienced exponential growth fueled by the technological revolution.
Commenting on this, Kristina Hooper, chief global markets strategist at Invesco, said: “The market’s very impressive performance has been driven by the continued resilience of the US economy and enthusiasm for the Federal Reserve’s rate cuts.”
Wall Street: Between hope and fear
But, this does not mean that there are no concerns. Wall Street started October weak, on a negative note. In itself, US stocks retreated after the White House warned that Iran was preparing to launch an imminent ballistic missile attack against Iran. That warning caused oil prices to rise sharply.
At the same time, the technology sector has suffered a setback. Giants like Nvidia have seen significant drops in their shares, amid the imminent threat of a powerful typhoon heading towards Taiwan. This island, the heart of global semiconductor manufacturing, could suffer interruptions in its production, which in turn would generate a shortage of chips and seriously affect the supply chains of the global technology industry.
Still, the mood on Wall Street has improved dramatically compared to just two months ago. In particular, CNN’s Fear and Greed Index, which measures the emotions driving markets, approached “extreme greed” territory on Monday, marking a major improvement from August’s “extreme fear.”
Challenge to predictions
Despite all this, despite constant predictions of an economic recession, current data show a different reality. The US economy has proven to be more resilient than expected, especially driven by household consumption. Despite the high cost of living and high interest rates, consumers continue to spend, which is essential to maintaining economic growth.
The Federal Reserve, for its part, has prioritized protecting the labor market. The recent reduction in interest rates was carried out with the aim of avoiding a significant increase in unemployment. This suggests that the central bank is willing to take steps to stimulate the economy and avoid a contraction.
In closing, Michael Block, COO of AgentSmyth said: “People keep saying that consumption is going to suffer another setback, but that hasn’t happened. “American consumption remains strong.”
I say goodbye with this quote from Warren Buffett: “The market can remain irrational longer than you can remain solvent.”
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