Technical indicators suggest a bullish outlook for the market, driven by positive momentum, favourable interest rate expectations, and strong price performance.

Recent market sentiment has been bolstered by comments from prominent figures. Former NFL star Rob Gronkowski’s call for a market rebound aligned with positive remarks from NVIDIA CEO Jensen Huang, contributing to a rally in the S&P 500 and technology stocks.

However, despite the initial optimism, market participants remain cautious as they await the Federal Reserve’s upcoming interest rate decision. While a rate cut is widely anticipated, uncertainty persists regarding its magnitude.

Mixed news within the technology sector has introduced some hesitation among investors. Major index futures have shown relative stability, with the S&P 500 experiencing a 3.5% weekly gain.

In the competitive landscape of S&P 500 ETFs, VOO and IVV are gaining ground on SPY. VOO, in particular, is poised to surpass SPY in assets under management due to its faster growth and lower expense ratio.

Although SPY continues to attract significant trading volume, the increasing inflows into VOO and IVV from retail investors signal a potential shift in market share, prompting investors to reassess the evolving dynamics.

As the market enters a potentially volatile phase within the ongoing bull market, investors are encouraged to prioritise stocks with solid earnings growth and reasonable valuations. This becomes particularly important in the lead-up to the Federal Reserve’s meeting on September 18th.

In conclusion, while the market exhibits positive signs, a degree of caution is warranted as various factors influence its trajectory.

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[ABTrading 87]

Neat summary of the current market landscape.

This is definitely a period to stay agile.  The anticipation of a rate cut might already be priced in, but any surprises in the magnitude could trigger quick moves in either direction.

I’m personally keeping an eye on tech stocks too, as they’ve been showing strength, but I’ll be watching for signs of pullbacks or overbought conditions, especially if news announcements in tech start doing more to shake confidence.

How are others playing this – scaling in cautiously or going all guns blazing?

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[Christian HarrisParticipant]

I’m scaling in cautiously where available, ABTrading 87.

Indeed, not all guns are blazing because I expect some pullbacks as the markets are still overextended from the AI boom.

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[John J]

I thought it was a bit of a surprise from the Fed to cut rates by half a point to 4.75% to 5%, but not that wild.

The S&P, Dow and Nasdaq all shot up after the announcement, but those gains quickly evaporated and went negative. Dow was down 0.25% and S&P and Nasdaq 0.3% by 4 0’clock.

I’m wagering it will lower target range by a further 75 bps by the end of 2024.

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[Christian HarrisParticipant]

Just to add, John….

This marked the first decrease in borrowing costs since March 2020 and came in line with market expectations, although there had been some uncertainty about whether the central bank might opt for a more gradual 25 basis point cut.

In conjunction with the rate cut, the Federal Reserve released updated economic projections that shed light on its future policy path.

Policymakers signalled their intention to reduce the federal funds rate by a total of 100 basis points by the end of 2024, suggesting two more 25 basis point cuts before the year’s close.

Looking ahead to 2025, the central bank projected an additional percentage point of rate cuts, followed by a final 50 basis point reduction in 2026.

These projections indicate a clear shift toward a more accommodative monetary policy stance.

The Federal Reserve’s decision to cut rates reflects its assessment of the economic landscape, including factors such as inflation trends, employment data, and overall economic growth.

By easing monetary conditions, the central bank aims to stimulate economic activity, support job creation, and promote price stability.

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