Anna 
European stocks reached record highs on Wednesday, while the US dollar maintained its gains and the S&P500 received a late-session boost. The day’s price action suggested a potential end-of-quarter portfolio rebalancing, with laggards of the quarter such as Apple and Tesla gaining ground, while stars like Microsoft and Nvidia retreated, the latter falling 2.5%. Goldman Sachs cautioned that pension funds are expected to sell $32 billion worth of equities as part of rebalancing, potentially slowing the equity rally.
However, overall market trends are unlikely to change significantly given the substantial amount of cash waiting to flow into equities and bonds. Investors continue to hope for a Federal Reserve (Fed) rate cut at the June meeting, with Fed funds futures indicating a 64% chance of a cut.
However, the probability of a rate cut has decreased from around 75% last week as some investors doubt the Fed’s ability to cut rates amid strong economic growth and fluctuating inflation. The latest US GDP update, expected today, is forecasted to confirm over 3% growth for the US economy in the last quarter of last year, down from nearly 5% in the previous quarter. With such growth levels, an imminent Fed rate cut seems less likely. Consequently, the US dollar remains resilient, up approximately 1% since the Fed announced plans for a 75 basis point cut this year and signaled a slowdown in the pace of Quantitative Tightening (QT).
