For the first time in four years, the US Federal Reserve (Fed) made its first rate cut on Wednesday. All eyes were on the meeting because uncertainty was swirling around the size of the cut, with bets split between a 25 basis point cut or a more aggressive 50 basis point cut. In the end, he achieved a super discount of 50 basis points. and, as has been the case since the organization began raising rates in March 2022, the decision is already moving the markets, this time for the better. The main Wall Street indices are digesting the Fed’s decision with advances that are bringing them closer to historical levels: the S&P 500 has in fact set new highs in its entire history and the Nasdaq 100 has reduced the distance by 4%.
“By cutting 50 basis points instead of 25, the Federal Reserve is signaling its confidence that inflation will remain on a sustainable path toward 2 percent. FOMC members cut their forecast for core inflation to 2.3 percent from 2.2 percent. But the more important measure appears to be showing that They are determined to achieve a soft landing by preventing the labor market slowdown from dragging the economy into recession.. “The labor market is in a strong position and we want to keep it that way, and so is the economy,” Federal Reserve Chairman Jerome Powell said at his post-meeting news conference. “You could argue that bringing forward the cuts increases the chances that the economy will stay strong,” said Donald Ellenberger, senior vice president at Federated Hermes.
Overall, even though they ended virtually flat on Wednesday, it was on Thursday that the main Wall Street indices truly digested the organization’s decision. So, The S&P 500 has once again confirmed new historical highs to 5,700 points, bringing its annual gains to almost 20%, making it the most bullish selective among the world’s majors in 2024. For its part, the Nasdaq 100 is getting closer and closer to 20,000 points and moving away from the current ceiling of the year (which is also the historical ceiling) at 4%. With this Thursday’s increases, its annual revaluation once again exceeds 18%.
And with these new gains and as the market expects the Fed’s rate-cutting environment to continue this year, analysts’ bets are flattering for the tech index in the months ahead. Not only do they believe the Nasdaq 100 is capable of beating this level again, but also of taking it to the 22,187 points which set the price target for the coming months. This valuation leaves the selector with an additional 12% upside potential, which would add to the 15% increase it has accumulated over the year (since last year alone, the index rose 82%). They are also more than enthusiastic about the S&P 500, an index that should exceed 6,000 points in the coming months.
“Historically, when US inflation approaches the 2% target set by the Federal Reserve (Fed), the style momentum and technology stocks have generally outperformed. It is important to note, however, that this is just one part of the bigger picture. Falling inflation gives the central bank room to cut rates. In fact, typically a year after the Fed’s first rate cut, US stocks have posted double-digit returns. At the same time, the growth environment is particularly important when recessions lead to a more aggressive rate-easing cycle,” Schroders said.
American technology was one of the protagonists of the stock market fluctuations between August and September, so with the presentation of the results of the big technologyInvestors were worried that the AI fever had gone too far and that we were at the beginning of a new tech bubble. But major tech companies have been showing for yet another quarter that AI is already having an impact on their bottom lines, and analysts expect the profit expansion to continue for years to come. So, Since its August lows, the Nasdaq 100 has recovered nearly 9% of its value.
Now, technology is taking advantage of this new framework of lower rates and the good data that the US economy continues to show and is getting back on track. As many as 13 of the companies included in the technology index are approaching annual highs, some of them even close to their all-time highs. And as many as four of them are trading with more than 5% upside potential.
Among the large-cap companies in the US market, only Meta reached its highest level of the year after the central bank meeting, registering a revaluation in the year of more than 50%. In fact, the company chaired by Mark Zuckerberg not only reaches new annual highs, but this means for the company reaching a new absolute record. And even at these unprecedented levels for its stock (its value is close to $ 550), analysts expect its price to be still 5% higher in the coming months and recommend buying them on the stock market.
Along with Meta, Amgen, Autodesk and Paypal also hit yearly highs on Thursday, up 17%, 10% and 24% respectively in the stock market this year. However, of all three stocks, analysts are only saying they are buying Autodesk shares.
And the rest of the Magnificent Seven?
Of the rest of those known as The Magnificent Seven Only Apple is the company that is close to its highs of the year, which also match its historical highs. More precisely, the Apple company is located less than 2.5% of this ceiling and its stock could once again set a new record, since for experts it still has a trajectory of 8%. With an annual increase of more than 18%, analysts recommend buying its shares.
From there, everything big technology They are further away, but, with the exception of Tesla (which is suffering losses of almost 5% on the stock market and is trading without potential), the others stand out for the strong increases they have accumulated this year on Wall Street and the double-digit potential, with a special mention to Nvidia, which up more than 130% this year and still has 26% upside potential. Except that Tesla, Nvidia, Amazon, Microsoft and Alphabet are also worth buying on the stock market.
