Signs of strength in the economy, relief over a deal to raise the U.S. debt ceiling and an interest rate hiking cycle that may be nearing its end have heartened investors and driven the benchmark S&P 500Further gains may hinge on whether investors who cut stock allocations to the bone over the last year return to the market. Cash on the sidelines is plentiful: U.S. money market fund assets hit a new record of $5.
"There certainly seems to be a bit of a more optimistic ring to the market," said Chuck Carlson, chief executive officer at Horizon Investment Services. "Further strength might beget further strength because of the FOMO factor," he added, using the popular acronym for "fear of missing out."A stronger-than-expected U.S. economy is one reason for investor optimism, after many spent months girding for a widely expected recession.
While a severe recession was his biggest worry at the start of the year, now “the anticipated recipe for disaster is simply not present.” “Moving past the debt ceiling and at least having some economic data that looks ok is actually enough to get some people interested,” said Keith Lerner, co-chief investment officer at Truist Advisory Services.