Stock markets began to rally as investors are quite confident that the rate-hike cycle from major central banks is coming to an end or at least is in sight.
Nikkei 225 recently rose to its record high since 1990 as positive economic data continues to support investors’ confidence.
Meanwhile, global tech stocks went on a rally after Nvidia made its bold projections that its sales would reach $11 billion in 2Q23, which is 50% higher than Wall Street estimates of $7.15 billion. The American tech company noted that significant growth would come from rising demand for its GPU chips, which is used to train and deploy generative AI applications like ChatGPT.
Nasdaq is now +32% since the beginning of this year. The S&P 500 gained 14%, but also +20% from its recent low. The rally in Nasdaq also buoyed sentiment in other markets such as South Korea’s Kospi Index that rose 17% year-to-date, while Taiwan’s Weighted Index is already in a bull market with +21% from January.
However, the rally could be short-lived as the veteran economist and author of “Stocks for the Long Run” Jeremy Siegel pointed out that the same thing could happen just like during the dot-com bubble and housing crisis that the market saw a sharp rebound by over 20% then promptly erased all of those gains.
Siegel also expected a mild recession, stating that the Federal Reserve would not want to create a deep recession before the presidential run next year. This could lead to the Fed ending the hike cycle after the June’s meeting.
He noted that the Fed might raise inflation target to 3% from 2% earlier, which would give it more room to cut rates during economic downturns.