Equities skated into the Christmas holiday weekend with eight consecutive weekly gains. The weekly return for the S&P 500 Index was +0.8%, the Dow was +0.2%, and the NASDAQ was +0.9%. The S&P 500 Index was led by the Communication Services, Energy, and Health Care sectors. The Utility and Real Estate sectors lagged. The 10-year U.S. Treasury note yield decreased to 3.908% at Friday’s close versus 3.928% the previous week.
The November Personal Consumption Expenditures (PCE) Price Index was -0.1% month-to-month and core PCE, which excludes food and energy, was +0.1% month-to-month. Year-over-year, PCE prices were +2.6% and core PCE prices were +3.2%. This supports the Fed’s softening policy stance for 2024 if the pace of inflation continues to decline. Current CME Fed funds futures anticipate an initial reduction in the Fed funds rate as early as March 2024.
For full-year 2023, S&P 500 Index earnings are expected to grow by 3.1% with revenue growth of 1.9%. Looking ahead, current consensus for full-year 2024 is 11.1% earnings growth with 5.1% revenue growth.
In our Dissecting Headlines section, we look at some of the potential headlines we will need to dissect in 2024 for the Federal Reserve and the 2024 election cycle.
Financial Market Update
Dissecting Headlines: Looking Ahead to 2024
We look forward to every new year with hope, anticipation, and even a little anxiety. 2024 will likely be no different. The S&P 500 Index is coming off a great recovery from 2022’s down year and forecasted earnings are expected to grow into the new year.
The Federal Reserve anticipates inflation should continue to decline causing appropriate monetary policy to call for lower short-term interest rates. A key question is when. Current CME Fed funds futures anticipate an initial reduction in the Fed funds rate as early as March 2024. The first Federal Open Market Committee (FOMC) meeting of the year is scheduled for January 31st to February 1st, followed by its second meeting from March 21st to 22nd. Data should start to inform investors if the FOMC is likely to lower the Fed funds rate at the March meeting.
There will be a presidential election in 2024. With former President Trump the current Republican frontrunner, the Party’s Iowa Caucus scheduled for January 15th should be closely watched. Primaries continue over first half of the year leading up to the Republican National Convention in July. The Democratic National Convention is scheduled for August. We should hopefully have clarity on the two presidential candidates at that time. The first presidential debate is scheduled for September 16th and Election Day is November 5th.
While these events can start to build a framework for the year, the geopolitical, business, economic, and other unknowns that are likely to occur in 2024 may ultimately shape the year in a way we are not currently anticipating.
Want a printable version of this report? Click here: NovaPoint Weekly December 26, 2023
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