FX Evolution: Stocks Might Have Just Made a Big Switch
After hitting all-time highs last week, cracks have started to appear in the stock market. This could be a moment where markets make a healthy pullback, before moving even higher in the months ahead.
Given how bullish the market has acted the past few months, this kind of pullback is healthy. It’s also seasonal in nature. Investors tend to see a pullback after a strong start to the year.
While the market has been trending higher since late October, stocks are now showing signs of rotation. Investors are taking profits on high-flying tech stocks. And capital is starting to move to other parts of the market.
Over the longer-term, this is a strong sign of a healthy market. Investors are still bullish overall. However, a selloff in tech stocks could lead to a market pullback. That’s because these companies tend to be more volatile than the overall market.
In the meantime, central banks are looking to cut interest rates later this year. The data increasingly suggests that will be later rather than sooner.
A slow pace of rate cuts indicates a relatively strong economy. In contrast, fast rate cuts indicate that there’s an issue in the economy that needs to be addressed immediately.
So while the market may pull back in the coming weeks, we’re on track for better longer-term moves higher this year.