'Don't Fight Nvidia' Or The Fed, Says Mohamed El-Erian, Urges Investors To Recognize Dual Influence On Market Dynamics

Allianz Chief Economic Advisor Mohamed El-Erian stressed the Federal Reserve’s and NVIDIA Corp.’s (NASDAQ:NVDA) substantial impact on market dynamics, in a post on X on Thursday.

What Happened: El-Erian highlighted the long-standing market adage, “Don’t fight the Fed,” suggesting it should now be expanded to include Nvidia. He stated, “Whatever Nvidia does greatly impacts markets — just like the Fed.”

This statement underscores the pivotal role Nvidia plays in current market movements, akin to the Federal Reserve’s influence. El-Erian’s comments reflect growing market sentiment about Nvidia’s substantial impact on financial markets.

“Market chatter these days suggests expanding it to “don’t fight the Fed and, at least for now, don’t fight Nvidia,” he wrote.

See Also: NVIDIA To Rally Over 31%? Here Are 10 Top Analyst Forecasts For Thursday

Why It Matters: El-Erian’s warning comes at a critical juncture for the markets. On the same day, the Nasdaq and S&P 500 futures were showing resilience despite Nvidia’s recent stock dip. Nvidia’s shares fell following its second-quarter earnings report, which, despite beating expectations, raised concerns about the sustainability of the AI rally.

Adding to the market’s complexity, traders are adjusting their expectations for the Federal Reserve’s next moves. An upward revision of the U.S. GDP growth to 3% in the second quarter has led to a reevaluation of a potential 50-basis-point rate cut in September.

The market is now keenly awaiting the release of the Personal Consumption Expenditure (PCE) price index report– scheduled for 8:30 a.m. ET Friday, the Fed’s preferred inflation gauge, which could significantly influence future monetary policy.

Moreover, the U.S. economy’s robust performance, with an annualized growth rate of 3% in the second quarter, underscores its resilience amid high interest rates. This is the eighth consecutive quarter of growth, highlighting the economy’s strength despite ongoing challenges.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote