""There is a risk that Goldilocks meets one of the three bears," he says."
""the clearest takeaway here is if the two cycles do end up resembling each other, we've still got some runway before this market rally loses steam.""
""A growth shock," due to increased unemployment or "disappointments on AI." "A rate shock," due to the Fed not delivering more rate cuts. "A new Dollar bear," in which the greenback loses another 10% of its value (as it did in the first half of this year), which would hurt foreign investors in U.S. stocks-and turn them away from the American market."
The stock market is being propelled by optimism around AI and technology companies alongside expectations of one or two Federal Reserve rate cuts. The S&P 500 sits near its all-time high and futures are trading higher, reflecting positive investor sentiment. A Cleveland Fed president sees little near-term market drawback, and a comparison to the late 1990s suggests the rally may have additional runway. Three primary risks could derail the advance: a growth shock from rising unemployment or AI disappointments, a rate shock if cuts do not materialize, and a renewed 10% dollar decline that could deter foreign investors. So far none of these shocks have materialised.
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