Wall Street record highs for stocks as S&P 500, Dow set new peaks

With inflation cooling, investors are anticipating the Federal Reserve will be able to end its interest rate hiking campaign sooner rather than later, creating a more friendly environment for corporations.

Rob Swanke, senior equity strategist for Commonwealth Financial Network, explained that stock market valuations have been rising in recent months as investors factor in the prospect of lower borrowing costs and improved earnings expectations. He also argued that “there’s still room to move higher,” given that valuations are below their 2022 levels.

“Still, interest rates are much higher than at the beginning of 2022 and earnings expectations for 2024 are already high at close to 12% growth so expectations should be tempered,” he added.

Even with higher interest rates, investors are growing increasingly risk-tolerant with economic data proving stronger than expected in recent months. From rising retail sales reports to increasingly optimistic consumer sentiment readings, hard data continues to show the U.S. economy’s resilience, despite years of recession forecasts from experts—even the most widely predicted recession in history that simply didn’t materialize.

“Easing inflation pressures and the prospect of both lower interest rates and a soft economic landing have stoked investors’ appetite for risk,” Greg McBride, chief financial analyst at Bankrate, said in emailed comments Friday, noting that the…