For a brief moment on Friday, the S&P 500
SPX,
+0.02%
traded above 4,200 for the first time since August, according to FactSet data. The short-lived triumph set off a race among stock-market gurus, who have published a flurry of research to explain what they believe has driven a rally that few on Wall Street were expecting just a few months ago.
Is it investors chasing returns? Expectations for a soft landing? The Federal Reserve quietly pumping liquidity into the market while continuing to raise interest rates? The market’s irrepressible hope that the Fed will soon change course and start cutting rates? Or is it simply a factor of the artificial-intelligence craze breathing new life into technology stocks? To be sure, the 4,200 level has been persistently stiff resistance stretching back to last summer. Failure by the S&P 500 to sustain a push above it could set the stage for another significant retreat, analysts have warned.
At the same time, however, the market’s resilience in the face of a debt-ceiling fight that could spark a cataclysmic default has perplexed bears. Stock-market bulls have highlighted historical data pointing to the likelihood that the market’s bounce might have more room to run — despite the potential debt-ceiling disaster that Treasury Secretary Janet Yellen and many others have warned about. Chasing the rally One relatively straightforward explanation for why stocks have rallied this year is that skeptical asset managers have effectively chased the market higher, driven by pressure to boost returns as their main benchmark, the S&P 500, has drifted higher. Here’s how Tom Essaye, founder of Sevens Report Research, explained it: When 2023 began, most Wall Street traders were expecting stocks’ rally off the October lows would prove to be another short-lived bear-market bounce. See: Why stock-market bears are inadvertently supporting a rally despite some bad news Unfortunatel …
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