Looking at valuations, the price/earnings (P/E) ratio for “The Magnificent 7” stands at around 112 as of July 19th, meaning investors are paying approximately $112 for each dollar of corporate earnings. While a lower P/E ratio is generally considered more favorable, these tech stocks are still attracting investors despite higher valuations due to the perceived justification of AI advancement.
However, some investors are seeking additional opportunities beyond “The Magnificent 7,” as evidenced by the recent broadening out of the market rally and the return of the meme stock phenomenon, albeit limited thus far.
July Rate Hike and Economic Indicators
The Federal Reserve raised the U.S. benchmark lending rate by 0.25% at its July meeting, aligning with market expectations. This brings the Fed’s target interest rate range to 5.25% – 5.50%. Fed Chair, Jerome Powell, emphasized that further rate hikes would be assessed on a “meeting-by-meeting” basis, contingent on evidence of sustained inflation moderation.
Despite weaker-than-expected employment data, with 209,000 jobs created in June (versus the expected 240,000), the market anticipates a soft landing for the U.S. economy.
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