Investors’ optimism surrounding the decline in inflation in July from the 40-year high level drove the S&P 500 to a three-month high, and the Nasdaq 100 is trading more than 20% above its June low. Investors expect the Federal Reserve to be less hawkish on interest rate hikes in the upcoming months.
However, according to many market strategists, policymakers would need to see evidence of a slowdown in price increases for several months before changing their views. Moreover, a red-hot job market could encourage the Fed to maintain its hawkish stance.
