Market Anxiety Eases as Fed Still Expects Rate Cuts in 2024
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Market Anxiety Eases as Fed Still Expects Rate Cuts in 2024
Equity markets rose last week as the Fed curbed investor worries over recent mixed signals of inflationary pressures. Global equities (represented by the MSCI All Country World Index) were up 1.82%, and domestic stocks (represented by the S&P 500 Index) were up 2.31%.
Fed Meeting
Concluding their two-day meeting last Wednesday, the Federal Reserve policymakers kept the federal funds rate unchanged as widely expected. Investors took focus to the Fed’s Summary of Economic Projections, otherwise known as the “dot plot”. Despite recent concerns around inflation following higher-than-expected readings of the Consumer Price Index for January and February, the majority of policymakers still forecast three rate cuts this year. While Fed Chair Jerome Powell continued the narrative that they will remain data-dependent and want greater confidence that inflation is coming down to their target, he did note that it can be a bumpy path down to 2%.
Equity Markets
Equity markets responded positively to the Fed’s guidance as most of the gains for the week took place following the Fed’s decision and press conference Wednesday. Market participation broadened as global equities and smaller companies posted strong weeks. The CBOE S&P 500 Volatility Index (VIX), a measure of short-term equity volatility, fell 9% down to 13.06 last week.
US Home Sales
US existing home sales jumped 9.5% month-over-month for February, the largest monthly gain since February 2023. Housing Starts also popped 10.70% in February following a drop of 12.26% in January.
Looking Forward
This week the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, will be released for February. While both headline and core PCE have trended downward and sit at the lowest levels since 2021, recent inflation reports in the Consumer Price Index and Producer Price Index were hotter than expected for the month of February.
I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
