S&P 500 Analysis: Have We Reached a Breaking Point?

The US economy does not appear to be preparing for a contraction at all; on the contrary, it maintains a positive pace of expansion and the recent data shared by the various statistical bodies of the country dispel the hypothesis of imminent cuts in the level of rates.
Yet, behind the strong optimism, fears may be hidden, which in part seem to have already arisen and which can be observed in the market, such as the surge in the price of gold and US government bond yields.
How might the S&P 500 react to this situation? The US economy is booming The US report, shared on Friday last week, overwhelmed the market with a vague wave of optimism.
US employees increased by 303,000, beating all possible predictions.
This was accompanied by a decrease in the unemployment rate, which reached 3.8%, without considering the persistent growth in the wage level.
It's no small feat, in fact, it's exactly the opposite of what many hoped for.
In a situation of this type, it is difficult to hypothesize a lowering of the inflation rate and therefore how can we talk about a reduction in the level of rates? Without considering the increase in the country's manufacturing activity.
Therefore, there do not appear to be any conditions for an easing of central banks' monetary policy.
The bond market also understood this, which from the beginning of 2024 continued to record growth in the yields of US government bonds, almost as if anticipating the return of a "higher for longer" at a time when the entire market was celebrating at the beginning of the "season of declines".
S&P 500, why expect a decline? If the economy is booming, why did the S&P 500 decline last week? And rather, does it make sense to expect a continuation? The answer doesn't exist, but the prospects may surprise many.
In the sense that the fact that the economy is doing well may not be welcomed so positively by the stock markets.
This increases the possibility of new increases in inflation, a hypothesis which, although currently discarded by the market, cannot theoretically be ruled out, considering the surge in the price of oil and agricultural raw materials, without considering the very great resilience recorded by the sector of services in the latest PCI USA report.
The market could therefore opt for less risky solutions, turning off, at least temporarily, the "risk-on" button, moving to more conservative assets, thus consolidating its returns.
This is demonstrated not only by the strong growth seen in the price of gold in recent periods and the renewed interest in value stocks, but also by a lack of volumes on the US index futures market.