Bookmark This Tool to Track the Fed
|By Jim Nelson
Stocks had their best performance in quite a while in November, with all three major indices breaking their three-month losing streaks.
In fact, it was such a good month for the Dow Jones Industrial Average specifically that it is now sitting at its 2023 high.
Bonds, too, did very well over the past 30 days, with the 10-year Treasury yield dropping to 4.33%, as we write. That’s well off its 5% peak five weeks ago. Remember, yields move inversely to prices.
Still, despite this reignited investment landscape, market speculators are confident the Federal Reserve will not only keep rates where they are … but that they’ll start looking at cuts in early 2024.
Take a look at the CME FedWatch Tool — something to bookmark if you are interested in investor sentiment:
This shows what interest rate speculators expect the Fed’s target rate will be at the conclusion of the May 2024 meeting. Nearly half expect a 25-basis-point reduction, while 28.9% expect even deeper cuts.
How can you square these two seemingly opposite ideas — surging stocks and expected rate cuts? Well, the Fed’s favorite indicator just posted a very mild report for October.
The Personal Consumption Expenditures Index rose just 0.2% in October, the lowest month-over-month increase since the spring.
Whether this is the “soft landing” everyone has been talking about throughout 2023, who can say?
At the very least, it seems clear that rates will remain level for at least the next month. The Federal Open Market Committee will have its December gathering in two weeks. The FedWatch Tool gives it a 99.2% chance that the target Fed Funds range will remain between 5.25% and 5.5%.
Of course, there are many different ways to play all this news and speculation. Your editors all have their own preferred takes on this economic landscape. Here’s what they have to say …
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That’s all for this week. Have a great weekend!
Until next time,
Weiss Ratings Daily