US Equities Record High at Risk

Last Friday witnessed a remarkable surge for the US equity market, achieving unprecedented highs as bullish forces dominated the ongoing tug-of-war between reduced expectations for March rate cuts and a wave of optimism surrounding the technology and communication sector. The catalyst for this upward momentum was a bullish forecast from Taiwan Semiconductor, which not only surpassed expectations in fourth-quarter earnings and revenue but also provided a robust revenue outlook for the upcoming year.

This positive development fuelled anticipation among investors and traders, who eagerly entered the market in hopes of witnessing further favourable outcomes during the earnings season. Nevertheless, the potential for sustained gains faces potential constraints due to recent macroeconomic shifts that have reshaped market expectations regarding the Federal Reserve’s rate cut timeline.

Signs of a robust economy, such as stronger retail sales and a decline in jobless claims, have emerged, challenging the notion of an immediate need for rate cuts. This sentiment aligns with Federal Reserve Governor Christopher Waller’s earlier remarks cautioning against hasty and aggressive easing until inflation has sustainably reached the 2% target.

Consequently, the CME FedWatch Tool’s prediction for March rate cuts has significantly decreased from 81% a week ago to a mere 45%, providing a favourable tailwind to the US Dollar but potentially posing a challenge to the equity market’s continued ascent.

Sources: Koyfin, Tradingview, CME Group

Piece written by Tiaan van Aswegen, Trive Financial Market Analyst

Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.

Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.

CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.