The stock market is expected to gain 2% by year-end, as earnings reports show strong revenue and earnings beats. Companies are managing inflation by passing on limited price increases and maintaining margins. Interest rate concerns have subsided, and earnings growth is now the focus. While earnings growth projections are low, they could be exceeded, potentially boosting the market further. Companies are also considering altering service terms instead of raising prices to maintain market share.
Despite strong economic growth, the Federal Reserve (Fed) is not planning interest rate hikes. They believe current rates are cooling inflation and easing labor market pressure, and they expect inflation to eventually return to the 2% target. However, the Fed may adjust if data indicates a need for higher rates to achieve their goals. The strong economy is mainly driven by supply factors, which has helped keep unemployment low and balance growth.
