Fed meeting & the senior principal for applied research at Axioma, Melissa Brown, claims that investors and U.S. central bankers have differed about the timing of Fed policy easing.
For the past several months, traders have also been unsure about when to expect rate decreases, according to Fed-funds Futures Data.
The Fed’s last policy meeting of 2023 and a US inflation report in coming days should test a stock market rally that some view as stretched following weeks of gains. The S&P 500 is up nearly 20% in 2023 after a monthly gain in November that was its biggest of the year. pic.twitter.com/gJzB8m7nDQ
— Nick Kunze (@NickKunze2) December 10, 2023
After a horrific 2022, the U.S. stock market has rebounded this year. While benchmark 10-year Treasury rates (BX: TMUBMUSD10Y) declined from a 16-year high of 5%, they gained significant gains in December. Fed meeting & just 1.5% separated the Dow Jones Industrial Average DJIA from its previous record at the end of Friday. The previous Fed meeting was almost two years ago. According to Dow Jones Market Data, the S&P 500 index SPX is at its highest point since March 2022.
As for FactSet, the Nasdaq Composite increased by 37.6%, the S&P 500 gained 19.9%, and the Dow Jones closed the week 9.4% higher than the year before.
$SPX – Stock market at a crucial resistance and could be forming a possible double top. November was literally up only. Breakout and re-test as fed rates reverse which historically causes a sell off. Then when doom and fear is back load the 2024 election rally. pic.twitter.com/gGdj6GhugA
— IncomeSharks (@IncomeSharks) December 5, 2023
At Ned Davis Research, Ed Clissold serves as the lead U.S. strategist.
The U.S. Employment report released on Friday only heightens the worries of his detractors. On Friday, the government said that 199,000 new jobs were created in November. Economists surveyed by The Wall Street Journal anticipated 180,000.
The report also showed increasing salaries after the Fed meeting and a new four-month low for the jobless rate, which dropped to 3.7% from 3.9%.
The US Federal Reserve would “try to counteract any narrative about cuts being imminent,” according to Sanders. The Fed’s revised “dot plot” interest rate prediction, which is expected on Wednesday, may accomplish this. It will provide the most recent outlook from the Fed on the anticipated course of monetary policy. The Fed’s September statement, which reiterated the central bank’s stance of maintaining higher interest rates for longer, caught market participants off guard.
Sanders said that there’s still a chance that inflation would pick back up. Inflation is the central concern of the Fed. They shouldn’t ease up on the brakes so quickly since it would be counterproductive.