Nearing All-Time Highs Despite Interest Rate Hike Warnings?..."S&P500(SPX) Won't Easily Collapse"

▲ Artificial Intelligence (AI), US Stock Market, Bull Market/AI-generated image

Despite interest rate hike warnings from Federal Reserve (Fed) Chairman Kevin Warsh, Wall Street analysts predict that the US stock market bull run, led by an artificial intelligence rally, will not easily collapse.

According to investment media MarketWatch on June 21 (local time), Warsh presented a new approach to monetary policy communication that places greater emphasis on market price movements. Warsh revealed his plan to let the market reflect economic, interest rate, and inflation forecasts first, rather than the Fed directly leading financial markets.

The Fed froze its benchmark interest rate at 3.5-3.75% at its June meeting but left open the possibility of an interest rate hike this year. According to Dow Jones Market Data, the policy-sensitive 2-year US Treasury yield ended weekly trading at 4.177%, marking its highest level since February 2025.

Liz Thomas, Senior Market Strategist at SoFi, said, "I think it's a good thing for the Fed to talk a little less." Thomas believed that since the Fed's guidance is merely an estimation, the market can focus more on economic and corporate earnings trends than on Fed statements.

Scott Wren, Senior Global Market Strategist at Wells Fargo Investment Institute, stated, "Wall Street's job is to forecast the economy and inflation," adding, "It's better for the Fed to follow the market than to lead it." Wren said that the Fed doesn't have a strong need to raise interest rates merely due to a temporary oil price shock, and predicted that the benchmark interest rate would remain in the 3.5-3.75% range until the end of 2027.

MarketWatch reported that the S&P 500 Index (SPX) rose in four out of five interest rate hike cycles since the early 1990s. Albert Edwards, Global Strategist at Société Générale, diagnosed that households feel wealthier as the artificial intelligence bull market continues. However, he said, "Everything is fine until asset prices come down again."

Thomas believed that if the Fed has to raise interest rates due to high inflation, it could burden the stock market. However, he said, "The artificial intelligence momentum must continue," adding, "A significant part of what supports the bull market is right there." Last week, the S&P 500 Index rose 0.9%, the Dow Jones Industrial Average (DJIA) rose 0.7%, and the Nasdaq Composite Index (COMP) rose 2.4%, and all three indices closed within 2.1% of their previous all-time highs.

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