Wall Street Experts Dismiss Rate Cut Fears, Middle East Tensions, Predict Bull Market's Continuation

Despite recent concerns, Wall Street veterans are confident that the bull market will persist, citing a robust U.S. economy and the potential of artificial intelligence (AI) as key drivers.

What Happened: The U.S. stock market has experienced a recent downturn due to escalating tensions in the Middle East and apprehensions about monetary policy, as per a report by Business Insider.

The dip was triggered by higher-than-expected inflation in March, which led to a reevaluation of rate cut expectations for 2024. The situation was further exacerbated by Iran’s attack on Israel over the weekend, prompting investors to seek refuge in safe havens like U.S. Treasuries.

However, seasoned investors believe that these concerns are temporary and that the bull market is far from over. They have offered several reasons to support this view.

Tom Lee, from Fundstrat, suggested that the March inflation report wasn’t as alarming as it seemed, and a June rate cut is still plausible.

“Believe it or not, this was actually a very good CPI report,” Lee said. “It just tells you that this is a timing issue, it’s not structural. In other words, nothing else is causing hotter CPI.”

James Demmert, Main Street Research CIO, sees the current correction as a “buy-the-dip” moment, driven by Middle East tensions, rising bond yields, and concerns about delayed Fed rate cuts.

“We are buyers of this stock market correction because while the headlines are scary right now, we believe we have entered a new bull market led by the power of artificial intelligence,” said Demmert. “This new bull market can last for another 7-9 years, as AI is expected to drive significant productivity gains for companies across the board, which will strengthen corporate earnings.” 

Analyst Dan Ives, Wedbush Securities predicts that tech stocks will continue to soar, buoyed by strong Q1 corporate earnings and a projected surge in AI spending.

“We believe the recent risk-off environment and tech sell-off represent a clear buying opportunity into this upcoming tech earnings season,” Ives and other analysts said in a note on Sunday.

John Flood, the head of Americas equities sales trading at Goldman Sachs pointed to several positive catalysts ahead, including a historical post-tax season surge and rising corporate stock buybacks.

“There ‘s still plenty of dry powder out there,” Flood highlighted the $1.6 trillion influx into money market funds since 2023.

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Why It Matters: The recent Middle East tensions have been a cause for concern in the market. On Monday, Traders were selling stocks and buying oil in anticipation of a price hike due to a potential military escalation in the Middle East, where much of the world’s oil is produced. The fears were realized with an Iranian attack on Israel over the weekend, further fueling concerns about the impact on global oil prices and the potential for a U.S. recession.

Despite the ongoing tensions, Israel is reportedly considering a response to Iran’s direct attack/ The Israeli Prime Minister, Benjamin Netanyahu, convened his war cabinet to discuss potential responses, raising the stakes in the already volatile region.

However, as the Wall Street veterans suggest, the bull market may weather these storms, driven by the strength of the U.S. economy and the potential of AI. This optimism is further supported by the ongoing disagreements within Israel’s war cabinet, which could impact the country’s war strategy.

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Posted In: Analyst ColorNewsEconomicsMarketsartificial intelligenceBenjamin NetanyahuDan IvesFundstratGoldman SachsInflationJames DemmertJohn FloodKaustubh BagalkoteMain Street ResearchMiddle EastRate CutTom LeeWedbush Securities
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