The stock market indices are trending higher despite concerns over interest rates due to strong earnings growth in the tech sector. However, the rally is narrowing, with only half of stocks in the S&P 500 rising this year and less than a third outperforming the index. There are also concerns about the sensitivity of interest rates and the underperformance of small-cap and transportation stocks.
Market trading does not appear to indicate an imminent reversal, as indicated by the low CBOE Volatility Index. Economic indicators such as consumer spending, nonresidential fixed investment, and government spending continue to support economic growth. Expectations may be elevated, as current levels of the Conference Board's Leading Economic Index are associated with recessions. Corporate earnings, labor growth, and labor productivity are key to maintaining a “soft landing”.
