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  • Writer's pictureJade Rossback

Stocks Extend Their Winning Streak To 7 Weeks In A Row

The big three indexes; Dow, S&P, and Nasdaq, extended their winning streak to 7 weeks in a row, while the small-cap Russell 2000, and the S&P mid-cap 400 made it 5 weeks in a row.

Last week's FOMC announcement, which saw the Fed pause on interest rates once again, and all but called for an end to their historic rate hike cycle, while also forecasting more rate cuts in 2024 than previously expected, sent stocks soaring.

They are estimating 3 rate cuts next year (presumably 25 basis points each for a total of 75 basis points), which is 1 more rate cut than their previous estimate. In fact, they see 3 rate cuts in 2024; 4 rate cuts in 2025; and 3 rate cuts in 2026. That would put the Fed Funds midpoint at 4.63% in 2024, 3.63% in 2025, and 2.88% in 2026. (Currently it's at 5.38%.)

They estimate inflation (currently at 3.5% y/y), will end under 3% by year's end. They expect it to fall to 2.4% in 2024, 2.1% in 2025, and 2.0% in 2026.

They expect GDP to finish at 2.6% for the year in 2023, 1.4% in 2024, and then 1.8% in 2025, while the unemployment rate, currently at 3.7%, rises to 4.1% in 2024 and 2025.

The big debate now and likely early next year will be on when the rate cuts start.

The consensus going into last week's announcement was that rate cuts wouldn't start until May at the earliest. But after last week's dovish stance by the Fed, many are expecting those cuts to begin in March or possibly earlier.Moreover, even though the Fed is forecasting 3 rate cuts next year, many are pricing in 4-5 rate cuts (100-125 basis points).

With only 8 FOMC meetings next year, and a Presidential election in November, the belief is that the Fed will have to get their rate cuts in before that to avoid looking political. The nearest FOMC announcement prior to the November 5 election is September 18, which likely puts it too close to the election. So many believe the Fed will have to wrap it up before then, which leaves only 5 meetings to do it, making the July 31 meeting their last opportunity.

The 2024 FOMC meeting dates are: January 30-31, March 19-20, April/May 30-1, June 11-12, July 30-31, September 17-18, November 6-7, and December 17-18.

While they'll still have 2 announcements left after the election (November 7 and December 18), waiting until afterwards could also look political. So the current belief is that there's a relatively small window, and that essentially closes after the July 31 announcement date.

In other news, Friday's Empire State Manufacturing Index dipped to -14.5 vs. last month's 9.1 and views for 3.7.

And the PMI Composite report came in at 51.0 vs. last month's 50.7, with the Manufacturing Index at 48.2 vs. estimates for 49.2, while the Services Index was at 51.3 vs. the consensus for 50.6.

The Q4 rally continues to impress.

There's just 2 more weeks left before we close the books on 2023. But that leaves plenty of time to add to the quarter's, and the year's gains.

Historically, December is typically a strong month. And even though it's half over, the latter part is usually the best.

*Content provided by Zacks Investment Research. An American company dedicated to the production of independent research and investment-related content. It was founded in 1978 by Len Zacks, based on his insights while pursuing his Ph.D. at MIT.

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