What can happen if the US government’s latest shutdown can’t stop the stock market?
Stock prices keep rising, even the shutdown delays significant economic reports that usually increase trading. S&P 500 and Dow jones industrial average Set all-time high on Friday.
This is not right Big tech Running the market, which has often been a case in recent years. Sure, Nvidia And other darling of artificial-buddling frenzy is still climbing, but on almost everything wall Street A winner is coming. The Russell 2000 index of small stocks has set a record after taking about four years to return to all the high levels of its former. Sleep Also hit a record in an unusual confluence, while the most popular American bond fund is on track for at least five for its best year.
The previous shutdown has a minimum impact on the stock market or economy, and the bet on Wall Street is that something similar will happen again. Many professional investors hope that the market will climb more even after its at least 35% increase in April.
This is not to say that there are no risk. Most optimism is made on expectations for some things. If they do not, the beautiful picture on Wall Street can be very ugly. Among the possible concerns:
Stocks are expensive
This is the easiest criticism about the stock market after its almost tireless rally since April. Stock prices follow the path of corporate profits over the long term, but the stock prices have recently increased much faster than profits.
A remedy popularly popular by Nobel-winning economist Robert Shilar, which sees profits in the previous 10 years, shows S&P 500 near his most expensive level since 2000 dot-com bubbles. Some critics have created similarities between the bubbles that finally saw the S&P 500 half in the price, and recently AI Bonanza.
These are not just big domestic names in the concern of raising the S&P500 index. Allspring Global Investments Head of Equity Investments N. Miletty killed how much stock prices have shot for speculative types, such as small, money losing companies. He has done much better than his profitable counterparts in recent months.
She said that she is feeling relatively optimistic about the situations for stocks going in 2026, but “These are small bubbles that are about me. When you see such things, it is not usually a good thing.”
To ensure this, indications that suggest a very expensive stock market are famous in prediction of twist points in the market. As long as investors are ready to pay high prices, stocks can remain expensive.
Need to climb profits
To look more specific in assessment for stocks, either the prices of stock needs to be dropped, or corporate profits need to increase. This upcoming profit reporting is betting for the season.
Companies are ready to tell investors how much they made during summer, with PepsiCo and delta air lines to be closed on Thursday. JP Morgan Chase and other large banks will follow later quickly.
According to the factset, analysts are looking for S&P500 companies to report an collective increase of 8% per share from a year ago. They will not only need to hit that goal, but also to estimate continuous development for the rest of this year.
Even though companies are still trying to find out how to deal with tariffs, stubbornly high inflation and other changes in uncertain economy.
Federal Reserve needs to cut interest rates
The stock market has expected one of the main reasons that the fed would distribute a string of interest rate cuts.
Lower rates promote the economy by making the economy cheaper to borrow and spending for American homes and companies. They can prepare investors to pay high prices for stock, bonds and other investments.
According to CME group data, traders on Wall Street are expecting to cut interest rates at least three times till the middle of the next summer. Fed officials themselves indicated that they are likely to cut as the job market is slow.
But Chair Jerome Powell has insisted that he may have to change the plans quickly. This is because inflation remains above the 2% target of the Fed, and low interest rates can give more fuel to inflation.
Mileti said, “I think what Fed is going to do, he feels like interest rates and expectations.”
“If the fed does not cut as much as people are expecting, then any of these areas which look a bit speculative, because they are not based on basic things will have some real problems in those areas.”
AI boom needs to be paid
“This is a question of the decades,” said Yung-U MA, the main investment strategist of the PNC Asset Management Group.
The MA does not feel that AI-related stocks look very expensive, even after their large climb, but it is only until the growth of gangb who is growing and sales for the industry.
Expectations for AI also help to worry about long -term interest rates and inflation. The AI ​​will need to make the economy more productive to make up to the top -facing pressure on inflation and interest rates that are coming from the huge debt mountains that are building America and other governments worldwide.
“If we get these benefits for companies and for people’s lives, everything can last well for years,” MA said. “I think everyone is tying his luck to that ship, whether they feel it or not.”