Now that the Federal Reserve has lowered interest rates for the first time in nine months, investors may return their attention to the things that are most important for their portfolios.
Wall Street's projections for corporate earnings have been increasing all summer long, and the U.S. economy remains optimistic despite a slowdown in the labor market. Given that the Fed has indicated that more "risk-management" cuts, as Fed Chair Jerome Powell characterized them on Wednesday, are probably in the works, this could be sufficient to sustain the stock market rise for at least a few more months.
As Michael Brown, a senior research strategist at currency broker Pepperstone, told MarketWatch, "some of the recent economic data suggest that the economy is ticking along in much healthier fashion than some of the labor data would have led us to believe."
The Fed's most recent forecasts, which were made public last week, outlined what some have called an unexpectedly optimistic picture for the economy.
According to Robert Schein, chief investment officer of Blanke Schein Wealth Management, "the Federal Reserve's September projections contained nothing recessionary, indicating that even the Fed is confident in the ongoing soft-landing scenario." "Even if job growth slows, a strong economy is still positive for stocks."
Given that the valuations of large-cap stocks in the United States are at their highest points in years, strong corporate earnings are crucial for maintaining stock buoyancy.
Indeed, the S&P 500 SPX bottom-up predictions from Wall Street
+0.49%
are still lower than they were at the start of the year. However, in an interview with MarketWatch, Ben McMillan, chief investment officer at IDX Advisors, stated that the gains made during the summer has helped convince investors that the rally is probably still on stable ground.
"Unemployment is important, interest rates are the price of everything, but you have to go back to earnings at the end of the day," McMillan told MarketWatch in an interview.
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