High-priced S&P 500 powers ahead untroubled by political stress
Investor resilience was on display again in a week in which high election drama couldn’t keep the S&P 500 from doing what it’s done in nine of the last 11 weeks: go up, this time in all sessions. Even markets that initially lurched on President Joe Biden’s debate travails, such as Treasuries, calmed appreciably as economic data bolstered the case for rate cuts.
For now, however tumultuous the backdrop, the rally in risk assets is powering on, fueled by conviction that the economy is expanding enough to avoid a recession while still warranting Federal Reserve easing. Corporate credit and commodities joined the weekly advance.
“The Federal Reserve remains the dominant factor, and the belief that rate cuts will eventually take place,” said Mark Freeman, chief investment officer at Socorro Asset Management LP. As for politics, “the question is whether there will be a significant shift in fiscal policy,” he said. “At the moment, right or wrong, the assumption is there will not be.”
The S&P 500 gained 2% in the week, the most since April, as data showing a contraction in services industries and an uptick in the unemployment rate reinforced optimism on rate cuts. Ten-year Treasury yields, which initially spiked after Biden’s disastrous June 27 performance spurred wagers that Trump’s return to office would herald looser fiscal policy, erased the increase, as did the dollar, falling for the first week since May.
Chart 1
While the relentless advance in equities was welcomed by bulls, some of whom saw Trump’s improving
