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We are now firmly in euphoria territory with multiple asset classes notching new highs including both gold and its digital cousin bitcoin. The S&P 500 managed to register gains of 3.11% in March and 10.15% for the first quarter while the Nasdaq was not far behind with gains of 1.79% in March and 9.11% for Q1 2024.
Besides the AI bubble, the other factor that kicked off the current rally last October were expectations of as many as six interest rate cuts in 2024. Over time that expectation has come down to three rate cuts this year. Four out of the 19 Fed rate-setting committee officials expect rates to stay above 5% this year, implying one or no rate cuts. The third estimate of Q4 2023 GDP was released last week and pointed to 3.4% growth, strengthening the case for fewer rate cuts this year.