Fed rate cuts may not be enough to justify the rally in these stocks

  • Avoid the ‘Magnificent Seven’ stocks
  • Fed rate cuts may not justify the rally in these stocks
  • Laggards of the stock market could benefit from easing inflation and rate cuts
  • Owning the rest of the S&P 500 could be strategic in 2024
  • Interest rates’ impact on earnings is yet to be seen
  • Excess liquidity is draining from the financial system
  • Longer-duration bonds in the Treasury market look attractive
  • S&P 500 ended at a fresh record

Easing inflation and a few Federal Reserve rate cuts this year could help bolster laggards of the U.S. stock market, especially if the economy avoids a recession. The group of megacap technology stocks known as the ‘Magnificent Seven’ gained 111% on average last year, while the rest of the companies in the S&P 500 index advanced only about 3.5%. Owning the rest of the S&P 500 could prove strategic in 2024, given Amundi’s view that the Fed likely won’t cut rates by as much as many expect and that a ‘durable’ earnings recovery probably doesn’t take hold until the second half of the year. Interest rates’ impact on earnings is yet to be seen. Excess liquidity continues to drain from the financial system as the Fed plans to let its emergency bank-lending program expire. On the flip side, recent stability in the Treasury market makes longer-duration bonds look attractive. The S&P 500 ended at a fresh record.

Public Companies: Apple Inc. (AAPL), Alphabet Inc. (GOOG), Amazon.com Inc. (AMZN), Meta Platforms (META), Microsoft Corp (MSFT), Nvidia Corp. (NVDA), Tesla Inc. (TSLA)
Private Companies:
Key People: Craig Sterling (Head of Equity Research, U.S. at Amundi’s Investment Institute), Paresh Upadhyaya (Director of Fixed-Income and Currency Strategies at Amundi)

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Factuality Level: 7
Justification: The article provides information about the performance of the ‘Magnificent Seven’ technology stocks compared to the rest of the S&P 500 index. It also includes opinions and predictions from Craig Sterling, head of equity research at Amundi’s investment institute, regarding the potential impact of inflation, Federal Reserve rate cuts, and interest rates on the stock market. While the article does not contain any obvious misleading information or sensationalism, it lacks in-depth analysis and supporting evidence for some of the claims made. Overall, it presents a mix of factual information and speculative opinions.

Noise Level: 3
Justification: The article provides some analysis on the potential impact of easing inflation and Federal Reserve rate cuts on the U.S. stock market. It mentions the performance of the ‘Magnificent Seven’ technology stocks and suggests that owning the rest of the S&P 500 could be strategic in 2024. However, the article lacks depth and evidence to support its claims. It also includes some irrelevant information about the Treasury market and the performance of stock indices at the end.

Financial Relevance: Yes
Financial Markets Impacted: The article discusses the potential impact of easing inflation and Federal Reserve rate cuts on the U.S. stock market, specifically highlighting the performance of the ‘Magnificent Seven’ technology stocks and the rest of the companies in the S&P 500 index.

Presence of Extreme Event: No
Nature of Extreme Event: No
Impact Rating of the Extreme Event: No
Justification: The article primarily focuses on the potential impact of economic factors on the stock market and does not mention any extreme events.

Reported publicly: www.marketwatch.com