Market experts predict that the recent rally in the stock market due to the increased performance of artificial intelligence (AI) stocks is temporary and not expected to last. Michael Hartnett, a strategist from Bank of America, predicts that the S&P 500 may increase but is only expected to gain 100 to 150 points between now and Labor Day in September. Hartnett also stated that it feels like a combination of 2000 or 2008, where there was a big rally before the big collapse.
Lisa Shalett, the Chief Investment Officer at Morgan Stanley Wealth Management, stated that Exuberance around artificial intelligence, along with a resurgent US dollar, has produced extreme divergence and concentration risk in the main stock indexes…Such narrowness is not what new bull markets are built on. While Wall Street is hesitant that the rally will continue, the S&P 500 increased by 20% last week above its previous low in October.
Several factors are expected to limit further earnings growth and optimism, including the reliance on a surge in AI use. While Nvidia’s stock rose by 39.7% in the past month due to a strong earnings report and the launch of a new AI-focused chip, other companies, such as Intel, did not benefit from the rally, with their stock only rising by 15.77%.
Wells Fargo Investment Institute predicts an even more pessimistic outlook, stating that stock prices will not rebound until 2024. The bank estimates that the S&P 500 will fall and reach 4,000 to 4,200 by the end of 2023, and then only rebound to hit the 4,600 to 4,800 levels in 2024. Darrell Cronk, Chief Investment Officer for Wells Fargo Wealth & Investment Management, said that protecting capital during more challenging times is often as important, or more important, than growing capital.
The GDP rose at a 1.1% rate during the first quarter, which is a decrease from the 2.6% rate in the fourth quarter due to shrinking inventory levels. Wells Fargo believes that the economy is facing strains, and a moderate recession will occur later this year and into next year, followed by a recovery in the economy in 2024. Inflation concerns are expected to decrease as it should fall to less than 3% this year. In 2023, inflation is likely to remain at 2.9%, and it should reach 2.8% in 2024.
