The stock market faces a “bad breadth problem,” according to analysts at Yardeni Research.
Initially, the problem appeared to be related to the superior performance of the Magnificent-7 missile, analysts explained in a note. However, the focus has now narrowed to one prominent company: Nvidia (NASDAQ:). This shift in market dynamics has raised concerns about the sustainability of the broader market rally.
Investment strategists are adjusting year-end targets upward, yet Yardeni Research remains consistent with the year-end target of 5,400.
While the company is neutral on the near-term market outlook, it maintains a bullish outlook for the long-term trend. Despite this, analysts highlight potential headwinds, including growing political uncertainties at both global and domestic levels.
Analysts believe that the escalating conflict in the Middle East poses a great danger, and is likely to expand into a broader regional conflict. Domestically, they stated that the partisan divide in the United States is expected to deepen as the presidential election approaches, increasing market volatility.
Analysts note that the upside and downside ratios they track are still relatively bullish, which could be a bearish signal from a contrarian perspective.
The upcoming release of the PCED inflation rate for May will be a key indicator to watch. Analysts expect the data to show continued moderation in inflation, which should be bullish for stocks, provided prices do not rise due to heightened geopolitical risks.
