Global financial markets displayed a positive sentiment ahead of Monday's US market opening, buoyed by geopolitical news including the announcement of a temporary conflict cessation agreement between the US and Iran and the potential reopening of the critical global energy chokepoint, the Strait of Hormuz. Futures for the three major US stock indices all rose, international crude oil futures plunged by approximately $5 per barrel, US Treasury yields broadly retreated, while gold and Bitcoin saw volatile gains.
Wall Street's mainstream financial analysis firms widely believe that the dissipation of geopolitical risk premiums, coupled with positive catalysts like the record-breaking IPO of SpaceX, are further unleashing growth momentum in the US stock market. Financial research firm Citrini recently released a report noting that as external macro risks are gradually alleviated, the US market is shifting its focus back from macro volatility to thematic investment momentum driven by artificial intelligence (AI). The report predicts that the S&P 500 index has the capacity to climb further and break through the 8,000-point milestone before encountering technical adjustment risks; in an extremely optimistic scenario, the index could rise an additional 10% to 15%, with valuations for core AI concept stocks potentially doubling.
Currently, the focus on Wall Street has shifted to the upcoming Federal Reserve monetary policy meeting scheduled for this Wednesday. Due to the overall robust inflation and employment data previously released in the US, futures markets have been repricing the probability of a Fed rate hike restart within the year since May.
Addressing this core macro concern, the Citrini research team points out that the current market inflation pressures represent a temporary "supply-side shock" and lack long-term sustainability. Although, due to lagged transmission effects from the prior geopolitical conflict, Consumer Price Index (CPI) data for June and July may remain elevated, creating a so-called "Echo Shock," the actual source pricing pressure has already reversed. Concurrently, data shows that after adjusting for inflation, real wage growth in the US has seen a noticeable decline, and the labor market shows no signs of overheating, indicating a low risk of a structural inflation spiral triggered by wage growth.
Based on this analysis, the Citrini report suggests that at the first policy meeting chaired by the new Federal Reserve Chair, Kevin Warsh, the Fed is highly likely to keep interest rates unchanged and will not immediately begin reducing its balance sheet. Warsh is expected to favor observing core indicators including median CPI and trimmed-mean CPI, demonstrating tolerance for the inflation-moderating trend brought about by technological innovation.
In an assessment, Tim Duy, Chief Economist at macroeconomic research firm SGH Macro Advisors, noted that if Warsh delivers dovish policy signals during Wednesday's press conference, emphasizing trimmed-mean inflation moderation, falling oil prices, and AI's long-term productivity enhancements, it would further push valuations for risk assets higher. However, Duy also cautioned that substantial internal market divisions regarding the Fed's policy path remain. Given the persistent stickiness of core non-housing services inflation, the Fed still faces a potential window for rate hikes in September or the fourth quarter of this year, and the interplay between supply-side cost pressures and expectations for a technology-driven bull market remains complex.