The equity markets remain elevated, but investor sentiment is increasingly tied to the Federal Reserve’s next move. With Powell’s upcoming Jackson Hole speech expected to set the tone, markets face the risk of a seasonal correction if the Fed does not signal a clear policy shift. Slowing employment data and moderating but persistent inflation suggest a “bumpy” economic path ahead, with nominal GDP growth likely near 4.5% and real GDP closer to 1.5–2%. While the mega-cap technology leaders appear fully valued, opportunities are emerging in secondary AI-related stocks and sectors like healthcare, which is trading at historically low relative valuations despite renewed interest from major investors.

Overall, the market remains expensive, trading at 22.9x forward earnings, not far from the 2000 peak, and highly dependent on rate cuts to sustain momentum into 2026. Reshoring is anticipated to be a long-term growth driver, but near-term performance hinges on whether the Fed provides the necessary liquidity for broader market rotation. Healthcare, in particular, stands out as a contrarian opportunity, with large pharmaceutical firms adapting to pricing pressures and new models that bypass traditional middlemen. Without Fed support, however, growth beyond the top-tier stocks may stall, reinforcing the market’s reliance on monetary policy for continued expansion.

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