• Wall Street traders are betting the Federal Reserve will be able to engineer a soft landing
• This spurred a rally in riskier corners of the market, with stocks hitting all-time highs
• The S&P 500 reached an all-time high on hopes of a soft economic landing
Wall Street traders are betting the Federal Reserve can engineer a soft landing and avoid a recession. This optimism has fueled a rally in stocks and other risk assets.
Stock Indexes Hit New Highs
The S&P 500 reached an all-time high as traders grew more confident in the Fed’s ability to tame inflation without severely harming growth. The Nasdaq also rallied amid increased risk appetite.
Bond Yields Stabilize
After surging for most of 2022, Treasury yields have stabilized in recent weeks. The 10-year yield remains below 4% as expectations of Fed rate hikes ease. Lower long-term rates provide support to equities.
Commodities Mixed
Oil prices were little changed but remain around $85/barrel. Gold rose as the dollar weakened. Many commodities have come down from their peaks but remain elevated compared to last year.
Dollar Slips
The US dollar index fell from its recent 20-year high as global central banks signaled determination to fight inflation in their economies. A weaker dollar helps US multinational companies.
Risk Appetite Returns
Investors have become more willing to buy stocks, corporate bonds and other riskier assets. The VIX volatility index has fallen as fears of a severe economic slump fade. Markets are cautiously optimistic the Fed can pull off a soft landing.
