WEEKLY MARKET UPDATE 12/15/2023

About ten miles from the New York Stock Exchange (NYSE), a bull somehow got loose in Newark Penn Station this week and the timing seemed particularly appropriate as stocks and bonds continued to enjoy one of the strongest bull rallies in recent years.  The S&P 500 has now finished higher for seven straight weeks, a feat that has only occurred ten other times since 1990 (per FactSet).  In November, we highlighted how we wanted to see small-cap stocks, which had been notable laggards, begin to outperform.  Well, the small cap index, the Russell 2,000, reached a 52-week high Thursday after hitting a 52-week low just 48 days prior, the shortest turnaround time since the index formed in 1984 (per Bespoke).  The S&P 500 is now less than 2% below all-time highs and investors are asking themselves if this impressive rally is perhaps running out of steam or poised for a Santa Claus rally.

POWELL PIVOT

"It would be premature....to speculate on when policy might ease."

~ Federal Reserve Chairman Jerome Powell on December 1, 2023 ~

On Wednesday, however, Mr. Powell and the Federal Reserve contradicted that very message and pleasantly surprised investors by acknowledging that future interest rate cuts (not hikes) are “clearly…a topic of discussion” and have begun to “come into view”.  The Fed even went as far as updating its interest rate projections, or dot plot, to imply three 25 basis point (0.25%) interest rate cuts in 2024.  As a result, both stocks and bonds surged into the end of the week as investors celebrated this very dovish Fed pivot.  Exactly why the Fed shifted policy messaging so significantly in less than two weeks is somewhat unclear, but ultimately a more accommodative Fed is great for markets and investors have good reason to feel jolly heading into the weekend.

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

Thanks to our clients and friends who have referred business to us over the years.

Your endorsement has been the cornerstone of our growth and our greatest compliment.