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The first half of 2024 left no doubt for investors — it's an AI-driven market.
Big tech companies accounted for most of the stock market's gains and earnings growth in the S&P 500 this year, with investors rightly focused on what's next for AI trading.
However, looking back on this year, investors are still pondering one of the most important and unresolved questions to emerge from the pandemic: What is normal now, anyway?
In a note to clients on Tuesday, Lori Calvasina, head of global equity strategy research at RBC Capital Markets, wrote that not only investors are still figuring out what these post-Covid implications are for the economy and the stock market. What are the new routines, but that “it keeps a lot of them calm.”
Calvasina added that as he and his team meet with clients, “what has been most interesting to us lately, especially as the monetary policy path has been debated, is that the underlying idea It's that the post-COVID era will look very different. The post-GFC era, and even the post-tech bubble era, just resonates with many investors in the long-term community.”
The daily debate in the markets, as Kalvasina noted, is primarily about what the Fed should, should, need, or cannot do. Hold rates? Dropping rates? when and so forth.
Like sports debates about which team should have won last night's game and how a certain team might win tomorrow's game, daily and weekly market debates look at what J. Powell & Co. What they did in June, what they can do this month, and what they should do in September.
All of this is great fodder for the financial media and grist for daily market moves. And identifying the right-here-right-now trade-off is important enough for a certain type of market participant and a certain segment of some departments.
But on a play-by-play basis, the big picture Calvasina's team hears clients weigh is more consistent with what central bankers think the long-term neutral rate will be than what rates will be in a few months. . The destination is more important than the route.
For investors, a world where inflation is high but interest rates are high”[was] Seen as trade[off] to a healthier underlying economy than was experienced after the GFC,” Kalvasina's team noted.
For consumers, making peace with this new normal may be less appealing.
But we think the advances in Kalvasina's talk are worth repeating for investors in a year in which markets have been dominated by AI so far and politics are set to dominate in the coming months.
The next wave of technological innovation and leadership at the top of the world's largest economy is important to investors. Yet, in some ways, these changes are never fixed. Technology has been redefining the corporation and its profitability for decades. Politics has always been a risk for investors. And the scale of these questions almost eliminates the need to answer them.
However, finding a new normal for markets post-pandemic is really about finding the answer to investors' most fundamental question – how much does it cost to borrow money, and what can I do to justify more? need?
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