FX Evolution: Did the Fed Just Pull the Pin On the Stock Market?

Stocks started the year in extreme greed mode. While that’s calmed slightly in the first trading week of the year, investors still see a bullish outlook for stocks, at least in the short-term.

Investors largely see upcoming cuts to interest rates as the big driver for markets this year. Historically, it’s been better to buy the rumor and sell the news.

Once rate cuts do happen, news events may suggest a reason for a market decline. Until that scenario unfolds, the uptrend will likely remain in place.

Several sectors look particularly strong at the moment, continuing on momentum from last year. The first sector is the financial sector.

Regional banks showed strength into the end of 2023. That’s in sharp contrast to their selloff at the start of last year.

Utilities also looked strong. These companies sold off sharply over the summer and into the fall. Rising interest rates made the bond-like returns of utilities unattractive.

With the potential for rate cuts in 2024 hitting headlines, utility stocks could see solid returns this year as their yields are driven down.

Overall, the entire market is showing some upside momentum. While that created overbought conditions going into the start of the year, history suggests a solid month and year for stocks.

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