Market momentum points to a steady climb, despite potential fluctuations in the coming months.
SINGAPORE: The Straits Times Index (STI) has closed May on a high note, hitting its highest level for the year at 3,333, marking a 17-point increase from the previous week. With key moving averages (50-, 100-, and 200-day) continuing to show positive alignment, and quarterly momentum moving from neutral to positive, experts predict a steady climb for the STI through the summer months, according to a report from The Edge Singapore.
Market Trends and Expectations While fluctuations are expected, the STI is likely to maintain an upward trajectory, with immediate resistance at 3,350. Support has been adjusted to a congestion zone around 3,300, and after surpassing the 3,250 level, the next target is set at 3,450. Despite some concerns regarding elevated US risk-free rates, particularly the 10-year treasury yield, the overall market sentiment remains positive.
Over the past three years, the inversion of the 2-year, 10-year, and 30-year treasury yields has caused some market jitters, often signaling potential economic downturns. However, US markets have reached new highs this year, with the 30-year treasury yield now higher than the 10-year yield, approaching the 5-year yield. This technical pattern suggests that further significant rises in the 10-year (currently at 4.56%) and the 2-year (4.95%) yields may face challenges.
Federal Funds Rate Outlook Despite market concerns, experts expect a cut in the Federal Funds Rate (FFR) in the latter half of 2024. This expectation persists, even though the Federal Open Market Committee (FOMC) has indicated that rates may remain elevated until inflation shows a clear trend towards the 2% target. According to UOB Global Economics and Market Research, the outlook remains unchanged, with the FFR likely to stay at 5.25-5.50% through mid-2024, before experiencing two 25 basis point cuts in September and December of 2024.
