Federal Reserve’s Decision Sparks Stock Market Optimism Despite High Mortgage Rates and Housing Market Slump

The American Federal Reserve has announced that it will not be pushing for any further records on the stock market in the near future, causing investors to seek hope from other sources. Stock market traders had been holding onto the expectation that the US Federal Reserve would cut interest rates significantly in 2024, but despite inflation surpassing the target value of 2 percent, this did not happen. After March’s higher-than-expected inflation and Federal Reserve Chairman Jerome Powell’s rejection of any future interest rate cuts, it became clear that interest rates would remain high for a longer period.

The high mortgage interest rates have exceeded 7 percent for thirty-year loans and are deterring potential buyers, threatening a freeze in the housing market. However, despite these challenges, the disappointment in stock markets has been limited and the price correction has been moderate. The S&P 500, the leading American stock market index, has still seen a growth of over 5 percent since the beginning of the year.

Björn Eberhardt, Head of the Investment Office at Luzerner Kantonalbank, highlights positive results of American companies towards the end of 2023 and in the first quarter of 2024. The stock market was also bolstered by excitement around artificial intelligence, supporting it even as bond yields rose. Despite concerns about potential slowdown in consumer spending which may be unsustainable in long term there is optimism that broader foundation of S&P 500 will support its continued growth.