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Stocks Rise to Kick Off December with FOMC Meeting in Spotlight
Markets finished the first week of December in positive territory. Global equities, as measured by the MSCI ACWI, finished the week up 0.59%, while domestic large-cap equities measured by the S&P 500 rose 0.35%. Emerging markets led all major indices with a 1.42% gain for the week, extending what has already been a strong year for the asset class.
Upcoming FOMC Meeting
All eyes are on the Federal Reserve meeting taking place this week on December 9–10. The bond market has been trading with the expectation of a rate cut, and as of Friday’s close, rate-futures were pricing in an implied 87% probability of a cut. If delivered, this would mark the third reduction this year and bring the federal funds target range down to 3.50%–3.75%. Investors will also be watching for the updated economic projections and the new “dot plot,” which outlines policymakers’ outlook for interest rates over the next several years.
Key Data Points to Watch
The second key data point to watch in December will be the first full nonfarm payrolls report since the government shutdown began in early October, with investors set to receive the November jobs data on December 16, which should offer a clearer view of labor market conditions. Expectations for the report remain soft, as forecasts call for 38,000 jobs added, far below the September reading of 119,000, with the unemployment rate projected to edge up from 4.4% to 4.5%, and wage growth expected to slow from 3.8% to 3.6% year over year, though wages should continue to outpace inflation and support positive real earnings for households.
Personal Consumption Expenditures Index Rising
The Federal Reserve’s preferred inflation gauge showed a slight cooling, with the core Personal Consumption Expenditures Index rising at a 2.8% annual rate in September, down from 2.9% in August and still above the Fed’s 2.0% target, and U.S. consumer sentiment showed a modest pickup according to the University of Michigan’s preliminary December reading, which rose to 53.3 from November’s final 51.0, marking a small rebound after several months of weaker readings tied to slowing jobs growth.
Looking Ahead
For the week ahead, outside of the FOMC meeting, we will also receive updates on labor and productivity data.
As Always
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.
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