According to The New York Times, the S&P 500 hit a record and traded at over 3,000 on the stock index briefly as investors anticipate an interest rate cut later this month. Federal Reserve Chairman Jerome H. Powell implied in a comment that interest rates would be cut due to global economic slowdown and the uncertainty of the US-China trade wars.
This caused investors to boost the markets upward in a show of optimism. Many blame the trade war for discouraging business spending and manufacturing slowdown. If the Fed’s interest cuts aren’t enough to offset the fears of the trade war then it could potentially hurt the stock market. For now though, the economy is steadily growing and corporate profits continue to grow.
“You’ve got some modest growth, you’ve got moderate inflation, you’ve got a decent labor market, and you’ve got valuations in the market that aren’t stretched,” said Scott Wren, senior global equity strategist at the Wells Fargo Investment Institute.
Interest rate cuts lift stocks in two ways. First, they reduce the return on investments of bonds, the main alternative to the stock market. Second, a cut also makes it cheaper for consumers and companies to borrow which means more money circulating throughout the economy.