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Equities, gold, and crypto markets all advanced on Thursday following the Fed's much-awaited dovish pivot.

The Federal Reserve kept the federal fund rates unchanged at its latest policy meeting on Wednesday, marking the ending of one of the most interest rate-hiking campaigns in recent history. Furthermore, the central bank hinted that rate cuts are en route in 2024, bringing a fresh wave of optimism into the markets and pushing the S&P 500 to a new record close above 4,700. 
 

Fed Projects Policy Rate Drop to 4.6% in 2024 

The Fed held rates steady and indicated through new economic projections that the historic tightening of US monetary policy implemented over the past years through a series of rate hikes has ended. Furthermore, the Fed signaled that the long-awaited rate cuts are coming in 2024.  

Although the central bank’s view is now closer to that of investors, the latter are significantly more dovish in their forecasts. Still, 17 of 19 Fed officials forecasted that the policy rate will be lower by the end of 2024 compared to now, with the median estimate indicating a drop to 4.6% from the current 5.25%-5.5% range. 

In the wake of the Fed’s Wednesday meeting and the recent batch of economic data, many are now increasingly confident that the central bank will successfully pull off the elusive soft landing. This refers to a complex maneuver that involves keeping interest rates high enough to ensure that inflation is entirely under control without bringing economic growth to a complete halt. 

However, although many investors welcomed the Fed’s dovish message, some analysts still remain cautious about their 2024 outlook. 

“Into this year, the market had gotten cheaper … sentiment was bearish. Now you go into next year, the consensus is a soft landing, the multiple is much higher, the earnings estimates are higher, and I think that is going to make it a tougher market environment.”

– said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.

Stocks, Gold, and Bitcoin Rise Higher on Fed’s Dovish Stance 

While not everyone is confident of extremely welcoming market conditions in 2024, it is safe to say that the Fed’s latest message triggered a positive reaction.

Stock futures rose sharply, with the Dow Jones Industrial Average hitting a new all-time high. The S&P 500 futures climbed 0.3%, while the Nasdaq 100 futures rose 0.4%. 

Simultaneously, the 10-year Treasury yield plunged below 4% for the first time since August, sitting at 3.94% at the time of writing. Bitcoin (BTC) was also 0.15% higher at just below $43,000, while spot gold prices advanced 0.35% to $2,034. 

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