The S&P 500 Rises To Its Highest Point Of 2023 As Gloomier Outlook Puts 2024 Rate Cuts In View
The S&P 500 (Index: SPX) rose nearly 0.8% to close at 4594.63 on Friday, 1 December 2023. That's the highest close the index has reached during 2023, putting it just 4.2% below its all-time record high close of 4,796.56 from 3 January 2022.
Since the late October 2023 spike in long-term U.S. Treasury yields, stock prices have risen as the outlook for economic growth the U.S. economy shows signs of slowing. In the past week, the Atlanta Fed's GDPNow tool's estimate of real GDP growth for the current quarter of 2023-Q4 dropped to +1.2% from last week's projected +2.1% annualized growth following gloomy reports on new construction and manufacturing during the week that was.
Combined with more data pointing to slowing demand-driven inflation, the prospects for interest rate reductions in 2024 has increased. The CME Group's FedWatch Tool now anticipates the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% through next February (2024-Q1). Starting from 20 March (2024-Q1), investors expect deteriorating economic conditions will force the Fed to start a series of quarter point rate cuts at six-to-twelve-week intervals through the end of 2024.
In the short term, that's positive for stock prices because lower interest rates benefit firms that rely on debt to finance their growth and because indications of reduced earnings from slowing economic conditions have yet to register. The latest update for the alternative futures chart shows the trajectory of the S&P 500 is consistent with investors focusing their attention on either the current quarter of 2023-Q4 or the slightly more distant future quarter of 2024-Q1, as the short-term echo event affecting the dividend futures-based model projections that we discussed in last week's edition has come to an end.
Other stuff happened to influence the trajectory of stock prices, here's our summary of the past week's market moving headlines:
Monday, 27 November 2023
- Signs and portents for the U.S. economy:
- Fed minions are losing money, are expected to deliver multiple rate cuts in 2024:
- Bigger trouble, stimulus developing in China:
- BOJ minions see bigger inflation developing:
- ECB minions claim they're not done fighting inflation:
- Dow, S&P, Nasdaq end Cyber Monday with marginal losses
Tuesday, 28 November 2023
- Signs and portents for the U.S. economy:
- Some Fed minions claim they're still thinking about resuming rate hikes, others say probably not:
- More stimulus developing in China:
- BOJ minions get more data telling them to end never-ending stimulus:
- ECB minions get data showing bigger trouble developing in the Eurozone:
- Nasdaq, S&P, Dow eke out gains on Fed comments, consumer confidence data
Wednesday, 29 November 2023
- Signs and portents for the U.S. economy:
- Fed minions expected to be too slow to prevent recession in 2024:
- BOJ minions not too anxious to end never-ending stimulus:
- Nasdaq, S&P, Dow end mixed, but markets remain on track for big November gains
Thursday, 30 November 2023
- Signs and portents for the U.S. economy:
- Fed minions think they're done with rate hikes, but aren't sure yet:
- Bigger trouble, stimulus developing in China:
- ECB minions not keeping policies up with changes in inflation:
- Nasdaq, S&P rally takes a beat on last day of massive November; Salesforce boosts Dow
Friday, 1 December 2023
- Signs and portents for the U.S. economy:
- Fed minions expected to deliver rate cuts in 2024:
- Central bank minions expected to start planning rate cuts:
- S&P 500 rises to highest close of 2023 amid rate cut optimism
Just a few more weeks to go for 2023!
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