Stocks Set for Continued Gains as Momentum Grows

Stocks are set to continue their upward momentum, fueled by strong bullish sentiment and favorable market dynamics, according to the CEO of one of the world’s largest independent financial advisory and asset management firms.

Nigel Green, CEO of deVere Group, made this prediction as Asian equities gained momentum following a robust session on Wall Street, setting the stage for European stocks to follow suit on Tuesday.

The MSCI ACWI Index, which tracks both emerging and developed market equities, is on course for its ninth consecutive day of gains—the longest streak since December. This positive performance is largely driven by optimism in the US and several factors likely to sustain the rally in the coming weeks.

“The rally on Wall Street has been impressive, with the S&P 500 marking its eighth consecutive day of gains,” says Green. He attributes this bullish momentum to key drivers such as a surge in corporate buybacks, which have historically supported stock prices by reducing the supply of available shares and pushing prices higher. This trend is expected to persist, providing a strong foundation for further gains.

Momentum traders have also contributed to the rally by capitalizing on the strong upward movement in stocks, creating a self-reinforcing cycle of rising prices as more investors join in.

Beyond technical factors, there is growing optimism that the Federal Reserve may soon adopt a more accommodative stance. With the annual Jackson Hole economic symposium this week, many market participants anticipate that the Fed will signal its readiness to start cutting interest rates, injecting fresh enthusiasm into the market. Lower rates would make equities more attractive compared to bonds and other fixed-income investments.

The Fed’s potential pivot comes as inflationary pressures begin to moderate, allowing the central bank to ease without exacerbating price increases. Stabilizing inflation and resilient economic growth could lead to additional support for the economy through rate cuts, a prospect welcomed by the market for its potential to boost corporate profitability and make equities a more attractive asset class.

Green also notes that current market positioning and capital flows are sustaining the rally. Many previously cautious investors are now scrambling to buy stocks to avoid missing out on further gains, driven by a powerful FOMO (fear of missing out) effect. Meanwhile, sellers are losing momentum, with fewer investors willing to bet against the market in the face of strong momentum.

While the global economic backdrop has its challenges, it remains broadly supportive of higher equity prices. In the US, consumer spending is holding up, supported by a strong labor market and rising wages. Although there are concerns about a potential slowdown in growth, particularly in Europe and China, these risks are being offset by the prospect of monetary easing and robust corporate earnings.

Despite the rally, risks remain that could derail the market’s upward trajectory, including geopolitical tensions, unexpected economic data, or shifts in central bank policy. However, for now, the bulls are in control, and the path of least resistance appears to be upward, concludes Green.