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U.S. stocks have been in the doldrums. But there are risks that could dampen that optimism.
David Rosenberg, founder and president of economic consulting firm Rosenberg Research & Associates, said at the meeting on Wednesday that the three “major” risks are Federal Reserve policy, an unexpected recession and lower-than-expected corporate profits. CNBC Financial Advisor Summit.
this S&P 500 Index and high technical content Nasdaq It closed at a record high on Tuesday. U.S. stock indexes were up about 11% so far in 2024 as of around 3 p.m. ET on Wednesday.
A huge threat to the stock market
NvidiaMarket analysts said at the FA Summit that artificial intelligence chip maker companies played a huge role in driving the stock market higher.
Rosenberg said the company was “the clear poster child for generative artificial intelligence” and was “single-handedly responsible for the final leg of this bull run.” That number was up 90% for 2024 alone as of around 3 p.m. ET on Wednesday.
Brandon Yarckin, chief operating officer of Universa Investments, said at the FA Summit that as stock market sentiment becomes more positive, Nvidia “is undoubtedly a typical representative.”
Nvidia reported quarterly earnings results after the close on Wednesday.
Rosenberg said disappointing results could send stocks lower. He added that it was similar to what happened during the dot-com boom in 2000, when Cisco failed to turn a profit, ending the tech boom.
In addition, Federal Reserve policymakers have raised interest rates to the highest level in two decades to curb high inflation. It’s unclear when the Fed might start lowering borrowing costs; many market forecasters expect they will do so at least once before the end of the year.
Rosenberg said high interest rates have pushed up the returns investors can get from cash and money market funds, for example, where they can earn a 5% return. On a risk-reward basis, keeping interest rates higher over the long term could give cash and money market funds an advantage over stocks, he said.
Moreover, the U.S. economy remains strong amid rising borrowing costs and gradually declining inflation. This has led many forecasters to predict that the economy is heading for a “soft landing.”
Rosenberg said if no one saw a recession coming, it would be a “big surprise” threatening the stock market.
Carla Harris, senior client advisor at Morgan Stanley, said at the FA Summit that economic and geopolitical surprises and uncertainty are the two things investors hate most.
However, experts say long-term investors should resist the temptation to jump ship if the market falters.
The wealthiest and most successful investors “stay in the market longer,” said Raj Dhanda, partner and global head of wealth management at Ares Management Corporation.
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