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Equities Advance as Risk Appetite Strengthens and Policy Expectations Shift
Data from LSEG points to a marked increase in inflows into global equities over the past week, alongside record outflows from money market funds. This shift is indicative of a strengthening “risk-on” environment, as investors rotate back into higher-yielding assets.
At the same time, the market is already exhibiting considerable strength. The S&P 500 has not only recovered all losses incurred since the onset of the Gulf conflict, but has also surpassed the 7,000 level, signaling sustained demand for equities. A similar pattern is evident in the NASDAQ-100, which required a matter of weeks to move from oversold territory towards overbought conditions — a notably sharp reversal that underscores the current momentum’s strength. And, by all appearances, this may not yet represent the upper bound.
Further support is being provided by the early stages of the earnings season. Strong results from the banking sector, including JPMorgan Chase and Wells Fargo, have established a constructive tone, reinforcing confidence in both economic resilience and financial stability. Should this trend extend across additional sectors, the rally could broaden further.
Looking ahead, monetary policy remains a key variable. Should Kevin Warsh be appointed as the Fed’s Chair by the fall of May, policy is likely to tilt more decisively towards easing. The prospect of rate cuts could act as a significant catalyst, lending further support to the US equities and extending the current advance.
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