weekly market update 12/13/2024

The S&P 500 fell roughly half a percent on the week as investors prepare for next week’s Federal Reserve interest rate announcements.  Markets are overwhelmingly expecting another 25-basis point (0.25%) interest rate cut, but stocks have mounted an impressive rally since election day and were probably due for some weakness.  In addition, while December is historically a good month for the S&P 500, this week’s action is very consistent with historical trends as the “Santa Claus rally” usually does not materialize until the second half of the month (see chart below).  Next week will be headlined by the Fed’s meeting announcements on Wednesday, but other important data such as retail sales for November, the final read for third quarter GDP, and inflation data via the PCE will also be closely scrutinized.

AMERICA RUNS ON…INFLATION?

While this week’s consumer price index (CPI) for November was mostly in-line with expectations, food prices saw a notable rise and breakfast staples in particular, are getting more expensive.  Due in large part to drought and high temperatures, especially in Brazil and Vietnam, coffee prices are near 50-year highs with arabica coffee futures up roughly 70% year-to-date while robusta futures hit record highs into the end of November.  Egg prices are also rising, up 8% last month, as bird flu and growing demand have caused a carton of a dozen large Grade A eggs to cost $3.65 in November, up from $2.14 a year earlier (per CNBC).  The Federal Reserve typically focuses on core inflation which strips out food, but this might be little consolation for breakfast enthusiasts.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

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