After a new year stutter which saw the S&P 500 index fall in three of the opening four sessions, the world’s largest market is back to winning ways notching up a new all-time high on 19 January.

Investors seem to have taken heart from a widening in stock market participation beyond the ‘Magnificent Seven’ with the Philadelphia Semiconductor index, or SOX, also racking up new all-time highs.

Almost in stealth-like fashion, shares in Cambridge-based UK chip-designer ARM (ARM:NASDAQ) are up an impressive 54% since floating in September 2023.

Meanwhile, the technology-focused Nasdaq Composite index is now only 4% shy of its all-time high reached in late 2021. However, the small-cap economically-sensitive Russell 2000 is roughly 20% below its 2021 highs.

Stronger than expected economic data continues to play a part in stoking investor risk appetite.

Consumer confidence hit a two-and-a-half year high on 19 January after the University of Michigan Consumer sentiment reading jumped 13% to 78.8 against a reading of 70 expected by economists.

The second consecutive month of improvement took the cumulative gain to 29%, the biggest two-month increase since 1991 after a recession ended, according to Michigan University director of surveys Joanne Hsu.

The sentiment survey also provides a glimpse of consumer inflation expectations. Over the next year consumers expect inflation to average 2.9%, down from 3.1% previously. On a five- and 10-year timeframe, inflation is expected to average 2.8%.

The findings chime with a Federal Reserve Bank of New York survey released this month which found consumers expect inflation to ease over the short-, medium- and long-term.

While the latest data is supportive of the Fed’s view that inflation expectations remained well ‘anchored’, it does suggest more work needs to be done to get the measure back to the central bank’s 2% target.

Initial filings for unemployment benefits came in lower than expected at 187,000 compared with just over 200,000 the prior week on 18 January.

That was the lowest reading since September 2022, showing just how resilient the labour market has been in the face of higher interest rates.

All of which suggests the Fed can keep interest rates higher for longer without taking too much of a risk of pushing the economy into recession.

The odds of a Fed pivot to lower rates, which investors were pricing in as early as March a few weeks ago, have now drifted further out into late spring with markets now forecasting less than a 50% chance of an early cut.

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