The RSM US Financial Conditions Index indicates that the economy continues to benefit from a modest tailwind. This positive sentiment was further bolstered on Monday as equity prices surged following reports of an extended ceasefire and the anticipated reopening of the Strait of Hormuz.
Market gains were significant, with the S&P 500 climbing 1.7% and the Nasdaq jumping 3%.
Currently, the RSM US Financial Conditions Index is positioned 0.8 standard deviations above the norm. There is significant potential for further improvement during the second half of the year, particularly as a new wave of IPOs enters the market, spurred by the record-breaking SpaceX offering.
Furthermore, equity market volatility has dropped below its long-term average in recent weeks. This stabilizing trend, combined with ongoing economic expansion, strengthens the bullish case for higher valuations, even in the face of recent volatility in global energy and oil markets.