Stock markets around the world reached record highs as traders anticipate easing inflation in the United States. The upcoming release of US inflation data is expected to show a decrease in price pressures, potentially paving the way for interest rate cuts by the Federal Reserve in September.
While the US stock market reacted ambivalently to the news, with some sectors falling and others gaining, the overall sentiment among investors remains positive. The decline in inflation is not only due to price declines in certain goods but also in stable rents.
This unexpected drop in inflation has led to expectations of an imminent rate cut, despite stocks falling in the tech and growth sectors. However, experts attribute this to a potential investor rotation into value-focused offerings and the market already pricing in the rate cut news.
The positive sentiment in global markets is also supported by good templates from the US and Japan, with further gains expected. However, Goldman Sachs warns that the market may be on 'correction watch' if earnings disappoint and investors shift their focus to upcoming election results.
Despite the mixed reactions in the stock market, the lower-than-expected inflation report has ignited expectations of rate cuts and triggered a sectoral shift as investors rotate from top-performing sectors to laggards.
