On Friday, U.S. stocks surged to new highs as investors looked to the upcoming earnings reports to justify their bets on a soft economic landing.
For the sixth consecutive week, U.S. stocks climbed, with the $.DJI(.DJI)$ and the $.SPX(.SPX)$ hitting new records. The Dow rose 0.96% this week, the S&P 500 gained 0.85%, and the $.IXIC(.IXIC)$ was up 0.8%.
This marks the 47th record high for the S&P 500 this year. Despite lowered expectations for third-quarter earnings, investors are betting on yet another earnings season surprise. Analysts predict the weakest earnings growth in four quarters at 4.3% year-on-year, but forward guidance suggests a much stronger 16% rise.
These solid projections indicate that companies may easily outperform market expectations.
“Wall Street has recently underestimated American companies,” says Callie Cox from Ritholtz Wealth Management. “It’s tough to read this market, and I don’t blame anyone for being skeptical. We still think the biggest and most costly risk is missing the rally.”
Gold Soars to Record High Amid Uncertainty
Spot gold $Gold - main 2412(GCmain)$ hit an all-time high of $2,700 per ounce on Friday, driven by heightened safe-haven demand due to U.S. election uncertainty, escalating Middle East tensions, and a loose monetary policy environment. The rally continued throughout the day, briefly touching $2,737 per ounce.
Daniel Hynes, a senior commodity strategist at ANZ, said safe-haven demand has been boosted by rising tensions in the Middle East.
Nitesh Shah from WisdomTree added, "Aside from concerns about the Middle East, the upcoming U.S. election is highly competitive. This creates a lot of uncertainty, and gold is often the go-to investment in such times."
Mark Haefele, Chief Investment Officer of UBS Global Wealth Management, and his team noted, “We expect uncertainty and volatility to increase until the next U.S. administration is confirmed.” They recommended gold and oil as effective hedges in this volatile environment.
The ongoing global monetary easing, led by the Federal Reserve, is another factor behind gold’s rise. Many investors are betting that a more dovish Fed and slowing U.S. economic growth will push gold prices even higher.
Additionally, central banks worldwide have been increasing their gold reserves. In fact, gold purchases in the first quarter hit a record high compared to the same period last year.
Trump Effect
Finally, the so-called “Trump trade” is also playing a role in gold’s climb. Recently, Trump’s approval ratings have risen significantly, leading many to believe he will win the upcoming U.S. election.
Kelvin Wong, a senior market analyst at OANDA for Asia-Pacific, commented, “With the uncertainty around the U.S. election, investors are turning to gold as a safe haven. If Trump takes office, it should support gold, as he might heighten trade tensions and expand the budget deficit.”
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