 | AUTHOR: Jason Roque, CFP®, APMA®, AWMA® TITLE: Investment Adviser Rep – CCO TAGS: S&P 500, NASDAQ, FRB, Rates |
The Fed made a case for no cuts next year. Markets were hoping for cuts in 2024 and did not like the news, why?
Monday S&P 500 0.07% | NASDAQ 0.01%
Equities were little changed on Monday. There was little economic data, and all eyes are on Wednesday. Quite a bit of inflation-based data has been released since the start of the quiet period. So, concerns have been mounting about a rate hike. But still, expectations are for them to leave rates unchanged.
Tuesday S&P 500 0.22% | NASDAQ 0.23%
The market moves were decidedly pessimistic for Tuesday. The leading day to an FRB rate decision can often carry a cautionary tone. Investors are expecting the FRB to leave rates unchanged but signal that they are not done raising rates.
Wednesday S&P 500 0.94% | NASDAQ 1.53%
The FRB delivered the expected blow to markets. They left rates unchanged but did signal that they are not done raising rates. They have likely one more rate hike in-store and that would come in the November meeting. As a result, equities were down. The NASDAQ was hit harder as Growth stocks are more vulnerable to interest rate risks.
Thursday S&P 500 1.64% | NASDAQ 1.75%
Most of the FRB rate meeting fallout occurred on Thursday, not Wednesday. The likelihood of rates retreating slightly next year is being called into question. That risk is the adjustment we saw on Markets on Thursday. Prolonged elevated rates could spell a recession if no relief were to be in sight.
Friday S&P 500 0.23% | NASDAQ 0.16%
Strength in manufacturing and services kept market losses more muted on Friday. Regardless, the damage was done on the week. The fall from the previous week was the largest pullback for the S&P 500 going back to March. Rates should take center stage for the next 6 weeks as everyone prepares for the next/ last rate hike.
Conclusion S&P 500 2.93% | NASDAQ 3.62%
Markets bled out this last week. The S&P 500 got hit badly, but not as badly as the interest rate sensitive NASDAQ. Growth stock, which have been the darling of the year, have come back to earth a bit. The future prospect of rate cuts is a major player for investor sentiment looking to 2024. Reducing rates by even 15% of their current level (.825%) would likely be enough to avert a recession. The move could be a light catalyst for economic growth. A light enough catalyst that would help us avoid an uptick of inflationary pressures as well.
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