Wall Street "Veteran": The Continuation of the U.S. Stock Bull Market Depends on the Fed's Policy Stance, with Very Little Room for Error

BlockBeats News, July 2 – Bob Doll, CEO of Crossmark Global Investments, stated that the current U.S. stock market is in a "high-risk bull market." With inflation persistently above the 2% target, for the market to continue its upward trend, two conditions must be met simultaneously: corporate earnings must keep exceeding expectations, and the Federal Reserve must maintain a neutral or even accommodative policy stance.

Doll pointed out that although oil prices have recently declined, U.S. inflation remains above the target level. Moreover, the current rate-cutting cycle may be nearing its end, and there is even a possibility of another rate hike within the year. With valuations at historical highs, the market's reliance on earnings and policy has significantly increased, leaving little room for error.

According to FactSet data, the consensus among institutions is that the S&P 500 will rise by approximately 21.2% over the next 12 months, with a target level of around 8,918 points. Meanwhile, second-quarter earnings growth is expected to reach 23.1%, potentially maintaining growth above 20% for two consecutive quarters. The current forward P/E ratio stands at about 20.1 times, slightly above the five-year average.

In terms of monetary policy, the market is closely watching the latest remarks from Federal Reserve Chairman Kevin Warsh. He did not provide clear guidance on whether there will be a rate hike in July, reiterating that forward guidance will be downplayed, reliance on economic data will be emphasized, and the goal of bringing inflation back down to 2% will be adhered to.

Influenced by his comments, the yield on the two-year U.S. Treasury note briefly fell to around 4.15%. Market bets on a rate hike within the year have cooled somewhat, but overall expectations still indicate the possibility of a rate hike in 2026. The baseline scenario, however, leans toward keeping rates unchanged until 2027.