In 2024, the markets are reaching record highs as a result of several key factors. One of the main reasons is the expectation of a Federal Reserve interest rate cut. The market is pricing in the first cut as early as March. This optimistic outlook is also supported by the unabated AI trend.
Artificial intelligence in the public is mainly driven by Nvidia, but the most important stock for the entire sector is Taiwan Semiconductor Manufacturing (TSM), the latter showed results above expectations and confirmed the All Time High for both the Nasdaq 100 and the S&P 500 with a strong move up 12% in one day.
However, it is important to consider the potential risks. Global geopolitical events such as military conflicts can disrupt trade agreements and supply chains, leading to uncertainty and volatility in financial markets. Investors sometimes forget this and get caught up in a seemingly positive wave. Not only history but life itself shows that very sharp rises can be followed by periods of decline, as was the case when the dotcom bubble burst in the early 21st century.
Although most stock market experts express optimism about further growth in the major indices, it is important to be aware of the potential risk of a slowdown in the US economy, which may be influenced by the Fed's high interest rates. And as stock markets often overreact with anticipation, the economy always reacts to reality with a lag.