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Economist identifies three major threats to the stock market

The U.S. stock market has been performing well, with the S&P 500 and Nasdaq reaching record highs. However, economist David Rosenberg identified three major risks that could dampen this momentum: Federal Reserve policy, the potential for a surprise recession, and disappointing company earnings. These factors were discussed at CNBC’s Financial Advisor Summit.

  1. Federal Reserve Policy: The Fed has raised interest rates to their highest level in two decades to combat inflation. The timing of when these rates might be lowered is uncertain, and sustained high rates could make cash and money market funds more attractive than stocks.
  2. Surprise Recession: Despite current economic strength, an unexpected recession could significantly impact the stock market. The uncertainty surrounding economic and geopolitical events is particularly troubling for investors.
  3. Company Earnings: If companies, particularly key players like Nvidia, report disappointing earnings, it could trigger a market decline. Nvidia, a major driver of the recent stock market rally, reports earnings soon, and any negative surprise could have a significant impact.

Despite these risks, long-term investors are advised to avoid reacting impulsively to market fluctuations, as historically, staying invested over the long term has proven to be a successful strategy.

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Read more about this from this source: CNBC

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