What's going on?

The stock market didn’t just ignore the bearish forecasts in the first half of the year: it decided to run with the bulls.

What does this mean?

Analysts were in a serious funk when 2023 first rolled around, predicting a bear market and warning of a looming recession. But it looks like the S&P 500 decided to prove them wrong. See, it�s not just up a bit: it climbed a staggering 16% in the first half of the year, roaring past many pundits� full-year predictions.�

One driver of that has been the boom in AI: after all, it lit a fire under tech stocks, including the likes of Nvidia and Microsoft, and that�s warmed the entire market. It also doesn�t hurt that the US economy is trundling along much better than anyone expected, with solid, upwardly revised 2% growth in the first quarter helping to keep those recession whispers quiet.

Why should I care?

The bigger picture: No crystal ball.
This rally is a reminder that expert predictions, while often insightful, are still just predictions � and this year, they didn’t quite hit the mark. Stocks have proven to be more than a reliable guard against inflation too, outpacing the rate of price rises. And that�s no shocker: a lot of canny companies have managed to foist cost increases onto customers, cushioning the blow to their own profit margins.

For markets: Later or later.
With inflation coming down, investors have been hoping that stock-boosting interest rate cuts could be on the cards sooner or later. But this week the Federal Reserve essentially trashed any prospects of that �sooner� option: the central bank signaled that it�s planning to keep on hiking rates in a bid to fully stamp out price pressures � despite pausing hikes just last month. And that nasty little surprise could make it hard for stocks to continue their upward march.