The Fed’s Holiday Gift

Since the Fed’s announcement last week to pause interest rate hikes for a third time, the stock and bond markets have started a broad rally. This is a welcome sign because for most of this year, the breadth of the market has been extremely narrow and the Treasury Yield Curve has been inverted indicating potential Recession - the yield curve is still inverted. The Fed’s about face from hawkish statements in November is good news. The latest positive data on the economy:

  • The Federal Reserve’s backstop facilities of $164.8 Billion have halted back failures.
  • Inflation has decelerated and is down to 3.1% from 9.1% showing monetary policy is working.
  • Oil prices are down below $75 bbl lowering gasoline prices at the pumps.
  • 4 to 5 Rate cuts are expected next year beginning in March—.25% at each meeting.
  • Money Markets pay 4.5%+ again rewarding savers; Long term Notes & Bonds are near 4%.
  • Goldman Sachs raised their 2024 forecast for an 8% increase in stock prices on higher earnings.
  • With careful policy Artificial Intelligence should foster new & amazing computational insights.
  • The US & China may ease trade tariffs against one another to aid both their economies.
  • De-dollarization is not diminishing US ability to borrow and finance our national debt.
  • Stimulus and increased military spending already authorized by Congress assures a stronger US economy than other countries in the world.

The Fed’s Monetary policy and the Congress’ seemingly outlandish stimulus spending is confusing, perhaps maddening, but was/is likely required to get beyond the Great Financial Crisis & the COVID Dunkirk and to normalize the economy while maintaining US eminence. No doubt there have been excesses and their will yet be more fallout particularly for non-profitable companies and commercial real estate investors, but all in all positive initiatives underway provide optimism for robust employment, improved consumer sentiment, and plentiful jobs that are less administrative and more fulfilling. Though we remain cautiously optimistic by the many good tidings, we’ll still be prudent and dance near the exit door watchful of unfolding events while appreciating our Blessings as Americans. Reflecting upon those great Blessings, we genuinely thank you for your trust and confidence. Enjoy a wonderful Christmas and New Year filled with happiness!