Strong rebound in early May on Wall Street driven by corporate earnings and Fed rate cut expectations

From Nasdaq: 2024-05-07 10:52:00

In early May, Wall Street saw a rebound driven by strong corporate earnings and expectations of Fed rate cuts. Major indices recorded the best three-day run of 2024. Treasury yields also dropped, leading to speculation on market trends for the rest of the month and potential investment strategies for the weaker summer period.

During the first quarter earnings season, there was steady improvement, with 78.1% of S&P 500 companies beating EPS estimates. The softer-than-expected jobs report raised chances of a Fed rate cut, even as U.S. service sector activity contracted in April. The futures market now expects at least two rate cuts by year-end.

Economic data indicated falling consumer confidence and slower growth in the U.S. economy. Despite bets for earlier rate cuts, the Fed remains focused on combating inflation, keeping rates steady. The upcoming Presidential election year may bring increased volatility, but historically stocks rally during this period.

Given the historical performance during election years, rotating investments in sectors like consumer staples, utilities, and healthcare could be beneficial. Dividend investing offers stability with regular payouts, while low-beta and value investing provide safety and upside potential. Quality stocks can also offer protection against market turbulence and heightened volatility.

Looking ahead, the market performance post-election may surprise, as regardless of the outcome, the market tends to be bullish. Now might be a good time to consider potential investment opportunities that could benefit from either a Biden or Trump win. Download Zacks’ free Special Report for insights on stocks with high upside potential in various scenarios.



Read more at Nasdaq: Don’t Sell & Go Away in May, Follow These 5 Strategies Instead