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Fed rate cuts could spark a new stock bubble, SocGen says. Here's the level to watch in the S&P 500.
US stocks risk entering a bubble in the coming months, SocGen strategists say. Fed rate cuts risk adding further fuel to an already record-setting rally in stocks. The bank is eying a key level for the benchmark index that would signal the risk of a bubble. The market sees about an 85% chance that the Federal Reserve delivers a rate cut in September — but doing so could put the stock market on track to enter bubble territory in the coming months. That's according to strategists at Société Générale, who said they saw the possibility that the S&P 500 becomes overheated sometime in the next year. The level of the S&P 500 they're warning investors to look out for is 7,500. That implies a 19% gain for the benchmark index, and would signal that the speculative mania has reached bubble proportions. Here's what they're eyeing. 1) Fed rate cuts. Investors are widely expecting the Fed to cut interest rates, with the odds of a September rate cut spiking after the July jobs report was unexpectedly weak last Friday. According to the CME FedWatch tool, the market-priced probability of a 25-basis-point rate cut next month has jumped to 87%, up from 63% a week ago. "Gradual rate cutting could add to the positive effect of cyclical data, while aggressive Fed rate cuts to the terminal rate could drive a market valuation bubble," strategists wrote. 2) Bullish runway. Fed rate cuts are also adding to an already-positive environment for stocks, strategists said, pointing to factors like higher growth, healthy debt-taking in the private sector, and corporate activities improving from lows earlier in the business cycle. "Strong returns from the S&P 500 over the past three months have borne out our US outlook, crisis of confidence is short-term," strategists wrote. The S&P 500 reaching 7,500 next year would imply valuations similar to levels seen during the peak of the dot-com bubble, according to SocGen's analysis. The bank's base case is for the S&P 500 to land around 6,900 by the end of next year, implying a 9% gain from current levels. Chatter about a potential stock market bubble has been percolating around Wall Street in recent months, given the S&P 500's record-breaking rally. Stocks have quickly rebounded since bottoming on April 8 following Trump's tariff announcements, with the S&P 500 up 28% since then. Read the original article on Business Insider
Yahoo
a few seconds ago
- Yahoo
Boeing expected to fly 777-9 for first time in nearly five years, Air Current editor says
(Reuters) -Boeing is expected to conduct the first flight of its 777-9 jet in about five years as early as August 5, Air Current editor Jon Ostrower said on Monday in a post on X, citing two people familiar with the matter. Reuters could not independently verify the report. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
a few seconds ago
- Yahoo
Company advised by Trump sons said it hoped to benefit from fed money, then took it back
NEW YORK (AP) — A public document filed by a company that just hired President Donald Trump's two oldest sons as advisers included a sentence early Monday that said it hoped to benefit from grants and other incentives from the federal government, which their father happens to lead. But when The Associated Press asked the Trump family business about the apparent conflict of interest, the document was revised and the line taken out. Eric Trump and Donald Trump Jr. are getting 'founder shares' worth millions of dollars in New America Acquisition 1 Corp., a company with no operating business that hopes to fill that hole by purchasing an American company that can play 'a meaningful role in revitalizing domestic manufacturing,' according to to the filing. The president has geared his trade policy toward boosting manufacturing in the U.S. The original version of the securities filing said the target company should be 'well positioned' to tap federal or state government incentives. That reference was taken out of the revised version of the filing. The Trump Organization didn't reply to a question about whether New America still planned to benefit from government programs or why the line was cut. But the outside law firm Paul Weiss that helped prepare the document sent an email to AP saying it was 'mistake' made by 'scriveners,' an old term for transcribers of legal papers. Kathleen Clark, an expert in government ethics, said any excuses are too late because the Trumps had already tipped their hand. 'They just deleted the language. They haven't committed not to do what they said earlier today they were planning to do," said the Washington University law professor and Trump critic. "It's an attempt to exploit public office for private profit.' New America is what's know as a special purpose acquisition company, or SPAC. It's a publicly traded company that exists solely to use its funds to acquire another company and take the target public. New America plans to raise money by selling stock on the New York Stock Exchange at $10 a share. That will hand the two Trump sons a total of $5 million in paper wealth on the first day of trading. The company hopes to sell enough shares to raise $300 million, which it then plans to use buying a yet unidentified manufacturer. A press release issued by New America saying it was focused on 'American values and priorities." It made no mention of the aim to get government incentives. The filing to New America's potential new investors to Securities and Exchange Commission was explicit about what it was looking for in target company. It said, among other things, it would that can ride 'public policy tailwinds" by benefiting from federal or state 'grants, tax credits, government contracts or preferential procurement programs.' Sign in to access your portfolio
