Mid-Week Market Minute 12.13.23

Market Updates

Stocks Climb; CPI Report for November

Stocks continued their upward trajectory this week amid key inflation data and the looming FOMC decision on Wednesday afternoon. Both domestic and international stocks have staged an impressive rally over the past several weeks on the back of lower interest rates and optimism surrounding a potential soft-landing for the economy. The S&P 500 is currently on pace to finish the year higher by more than 22%, while international developed stocks are better by 14%. In bonds, the Bloomberg Aggregate index has gained nearly 3% so far this year.

The markets took Tuesday morning’s report on November CPI inflation as further evidence of a broad disinflationary trend both domestically and abroad. Despite last week’ stronger-than-expected jobs report, core inflation came in as expected, gaining 4.0% on an annual basis. The composition of the report was mixed, but overall trending in the right direction.

The Federal Reserve has held policy rates steady since July, and everything on the data front suggests a continuation of this wait-and-see approach at the conclusion of Wednesday afternoon’s policy-setting meeting. Futures markets have essentially eliminated any chance of further rate hikes this cycle, and traders have shifted, too, handicapping the timing and magnitude of future interest rate cuts. Still, we expect Fed Chair Jerome Powell's remarks at today’s news conference to reiterate the FOMC’s commitment to keeping rates restrictive until they can officially declare victory over inflation, which we believe may take longer than the markets currently are expecting.  

Source: GSAM, CNBC, JPMorgan

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