Artificial Intelligence, Not Fed Rate Cuts: How the Stock Market is Driven by AI and Company Performance

Analyst warns that Fed rate cut may negatively affect stock market outlook

In recent news, the U.S. Federal Reserve Board Chairman Jerome Powell announced that interest rates will remain unchanged, alleviating concerns of a possible rate cut that typically signals economic trouble. Despite many investors eagerly awaiting a rate cut from the Federal Reserve this year, Bespoke’s Paul Hickey cautioned that this may not necessarily lead to the market boost that some are hoping for. He explained that a rate cut usually indicates economic challenges rather than positive trends and could even signify a significant economic slowdown.

Despite the anticipation for a Fed rate cut, Hickey pointed out that the current market performance, with major U.S. indices reaching all-time highs, has little to do with central bank actions. Instead, he highlighted that recent stock market gains are more likely due to the influence of artificial intelligence, with developments like ChatGPT’s announcement in late 2022 playing a significant role in the rally.

Looking ahead, Hickey suggested that earnings reports may pose a greater risk to the stock rally than the absence of a Fed rate cut. He pointed to market reactions during last week’s earnings reporting as an indication that the stock market’s performance may be more closely tied to company performance rather than central bank policies.

In summary, while many investors are eagerly awaiting a Fed rate cut from the U.S. Federal Reserve Board Chairman Jerome Powell, Bespoke’s Paul Hickey cautioned against relying solely on central bank actions to drive market growth. Instead, he emphasized the growing influence of artificial intelligence and company performance in shaping recent stock market gains and future trends.

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