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  • Scott Poore, AIF, AWMA, APMA

Fed Provides Additional Wind At The Back Of Equities

The Fed provided the market with a Christmas gift last week, as equities continued the march higher.

Though the Fed kept the Fed Funds rate unchanged last week (as expected), the "Dot Plot" for 2024 and 2025 projected future cuts to the Fed Funds Rate. In fact, during the Wednesday presser, Fed Chairman Powell stated it's now a question of when to "begin dialing back" interest rates, while NY Fed President Williams stated the Fed is not discussing cuts. I guess Fed members need to get on the same page with their comments. Regardless, equities spiked higher on Wednesday. More good news on the breadth front, as market breadth increased 4-5x over the past week and 21% of large cap stocks made new highs. Small cap equities out-paced other major asset classes for the 2nd consecutive week. Global equities also saw many international stocks make fresh 52-week highs.


On the economic front, financial conditions continue to support the "soft landing" premise.


The National Financial Conditions Index loosened again last week and is no where near the elevated levels of August 2007 (just a few months before the 2008 Financial Crisis began) and risk is at a much lower level today than then. Inflation, as measures by CPI & PPI, dropped again in November. Retail Sales were stronger than expected and higher year-over-year. The Labor Market continues to be strong, supporting further consumer spending. Lower interest rates and flat-to-declining inflation will lead to economic growth heading into 2024.

 

Disclosures


The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.


Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.


Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.


Past Performance does not guarantee future results.

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