.jpg "AI Optimism Fuels Global Equity Markets Higher Photo")
Legendary investor Benjamin Graham’s famous quote — “In the short run, the market is a voting machine, but in the long run, it is a weighing machine,” — was in full force last week after Nvidia shattered earnings expectations. Investor enthusiasm around artificial intelligence (AI) spread well beyond the market-leading large-capitalization technology names, with equity markets across the globe reaching record high territory.1
The positive equity market story will likely be viewed less favorably by Federal Reserve (Fed) policymakers, needing more proof inflation will continue to move lower before cutting interest rates. Improving household balance sheets coupled with persistent tight labor market conditions may run counter to the Fed’s projection that inflation is likely to “step down in 2024 as demand and supply in product and labor markets moved into better alignment.”2
This week’s economic calendar is highlighted by the Fed’s favorite inflation gauge, personal consumption expenditures (PCE), out Thursday.3 January PCE and core PCE are expected to increase to levels not witnessed since last September, providing another challenging data point for Fed policymakers looking for better news on the inflation front.4
Sources:
1Reuters – Nvidia fuels global stock records, bond yields rise; 2/22/24
2Board of Governors of the Federal Reserve System – Minutes of the Federal Open Market Committee January 30–31, 2024; 2/21/24
3MarketWatch – U.S. Economic Calendar; as of 2/26/24
4Bloomberg
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