Markets continued their growth trajectory for the first half of December, with significant increases earlier this week. Economic news has remained positive, including steady job growth rates and easing inflation.
The Federal Reserve (the Fed) concluded their last meeting of the year on Wednesday, December 13th. In a widely anticipated move, they chose to leave interest rates unchanged. While this action itself was largely a non-event, comments by the committee and Fed Chairman Jerome Powell sent markets rocketing upwards.
Of note, Chairman Powell said, “Inflation has eased from its highs and this has come without a significant increase in unemployment. That’s very good news.” Regarding possible future interest rate hikes, the Fed’s statement included language that “…the committee would take multiple factors into account for any more policy tightening” – the first time the word “any” was included in their statement, indicating a possible end to the tightening cycle.1
Furthermore, the Fed showed a willingness to cut rates at least 3 times in 2024.2 The market had expected cuts in 2024, but the Fed had avoided forecasting them before now. As a result, Wednesday’s markets posted significant gains: all major indexes were up over 1% and the Dow Jones Industrial Average (the Dow) closed above 37,000 for the first time in its history.
The coming weeks will feature a multitude of articles forecasting the market for the coming year. We will also do our best to provide guidance on our expectations. However, we would be remiss to not point out the long-term nature of investing. Yes, we want to be prepared for the short term but we should also be mindful of our time horizon. One of our favorite economists, Dr. David Kelly, recently framed it this way:
“As winter weather envelops the homes of New England, our thoughts naturally turn to warmer days and maybe a beach house on Cape Cod. Of course, if you intend to rent such a house for a week next summer, it’s pretty much a roll of the dice. You could get lovely weather or it could rain every day. However, if you plan to buy a beach house on Cape Cod, you really only need to understand the climate. The sunny summer days will far outnumber the wet ones. Long-term investing is like buying, rather than renting, a beach house. The important thing is to understand the climate rather than to forecast the weather.”3
Reviewing returns for the first half of December, the markets all posted significant gains. As of market close on December 15th, the Dow Jones Industrial Average (Dow) rose 1,361 points (3.79%), the S&P 500 climbed 150 points (3.29%) and the NASDAQ Composite Index (NASDAQ) gained 587 points (4.13%).
1,2www.cnbc.com “Fed holds rates steady, indicates three cuts coming in 2024” December 13, 2023
3“Notes on the Week Ahead; The Investment Climate” Dr. David Kelly, December 11, 2023
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