Wall Street "veteran": The continuation of the US stock bull market depends on the Federal Reserve’s policy stance, with very little margin for error

BlockBeats news, July 2, Crossmark Global Investments CEO Bob Doll stated that the current US stock market is in a "high-risk bull market." Against the backdrop of inflation remaining above the 2% target, for the market to continue rising, two major conditions must be met: corporate earnings must keep exceeding expectations and the Federal Reserve must maintain a neutral or even accommodative policy.

Doll pointed out that although oil prices have recently retreated, US inflation remains above the target level, and this rate-cutting cycle may be nearing its end, with the possibility of another rate hike this year not ruled out. With valuations at historic highs, the market has become significantly more dependent on earnings and policy, and overall tolerance for error is low.

FactSet data shows that institutions collectively expect the S&P 500 to rise by about 21.2% over the next 12 months, with a target of around 8918 points. Second quarter earnings growth is projected at 23.1%, with hopes to maintain over 20% growth for two consecutive quarters. The current forward price-to-earnings ratio is about 20.1 times, slightly higher than the five-year average.

In terms of monetary policy, the market is broadly watching the latest statement from Federal Reserve Chair Kevin Warsh. He did not give a clear indication on whether rates will be raised in July, reiterating that forward guidance will be de-emphasized, economic data will drive decisions, and the commitment to bring inflation back to the 2% target remains firm.

As a result of his remarks, the yield on US two-year government bonds temporarily fell to around 4.15%. Bets on a rate hike this year have cooled, but overall expectations still indicate the possibility of a rate increase in 2026, with the base case leaning towards rates remaining unchanged through 2027.