The bull market's Happy Anniversary

US equities are four years into a bull market, with the S&P 500 up 15% this year alone. Strong economic fundamentals and corporate profit growth, including record profit margins, are driving this rally. We expect this trend to continue this quarter with solid revenue and earnings gains.

In contrast, bond investors face rising yields driven by inflation, Fed rate hikes, and geopolitical concerns. While equities focus on economic strength, bonds react to inflation and policy uncertainty. The Federal Reserve's monetary policy, especially with potential rate hikes and the upcoming midterm elections, introduces significant near-term risks. We anticipate the Fed will hike rates in December and March.

The key uncertainty remains the Middle East conflict's impact on oil prices and the lag effect of Fed tightening. We forecast solid GDP growth through 2027, with the Fed expected to reverse course in the latter half of next year as inflation eases. However, persistent energy price volatility and the Fed's reaction function will be critical to monitor.