Major US stock indexes rose again last week, courtesy of a dovish Federal Reserve (Fed) tone that markets have been waiting for. More on the Fed in just a second!

Overall, last week, the S&P 500 rose by 2.49%, the Nasdaq 100 tacked on 3.35%, and the Dow Jones Industrial Average increased by 2.92%—ending the week at an all-time weekly closing high.

Stock Index Highlights

Given the impressiveness of stock indexes of late, it’s worth digging a bit deeper into each index:

• S&P 500: Posting its longest weekly winning streak since 2017, the broadest measure of the U.S. economy continued its recent march upward, featuring broadening sector strength.
• Dow Jones Industrial Average: The Dow closed above 37,000 for the first time in history last week, as Federal Reserve Chair Jerome Powell hinted at rate cuts.
• Nasdaq 100: The Magnificent 7, while “expensive” by some measures, fared well last week, with the overall index also up 47% so far this year.

This week (Monday) features an index rebalancing of the Nasdaq 100, with some stocks being cut and others being added. For example, eBay is out of the index as of Monday, and database builder juggernaut MongoDB is in.

Federal Reserve Tone Pivot

At last week’s meeting, the Fed left benchmark interest rates unchanged at the 5.25% – 5.50% level—marking three consecutive meetings of unchanged interest rate policy.

Most importantly, the Fed indicated a higher likelihood of pivoting to a more accommodating monetary policy stance soon (think rate cuts).

According to Fed members, the most recent projections indicate the possibility of three 25-basis-point rate cuts in 2024.

Markets loved the more dovish-sounding Fed last week, and the bulls kept charging, leading major U.S. stock indexes higher and Treasury yields lower.

Full Shopping Carts

The Teflon-like U.S. consumer continued to spend in November, as U.S. retail sales rose 0.3% for the month, rebounding from the 0.2% decline in October and stomping expectations of a 0.1% fall.

Falling gas prices may have helped to bolster the consumer despite a slide of 2.9% in gas station receipts.

Notable spending highlights included gains at bars, restaurants, sporting goods stores, hobby stores, and online retailers.

CPI Near Expectations

Prices for consumer goods and services, as measured by the Consumer Price Index (CPI), edged slightly higher month-over-month in November, showing a 0.1% increase from October and a 3.1% year-over-year rise, according to data from the Labor Department.

The measurements were mostly in line with expectations, with Dow Jones economists expecting no change month-over-month and 3.1% year-over-year.

The report was “somewhat in line, although, I suppose not as good as what some might have hoped that we would start to see more deceleration on a month-over-month basis,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.

While the data was good but could have been even better, markets remained in a good mood. In fact, the S&P 500 touched the highest level since January of 2022 on the same day as the data release, with the markets looking ahead to the Fed the next day.

The Week Ahead

The economic data calendar is a quiet one heading into the Christmas weekend. U.S. equity markets will be closed on Monday, December 25th, in observance of Christmas.

We will get the Fed’s preferred gauge of inflation data via the Personal Consumption Expenditures (PCE) metric and consumer confidence data this week. An in-line reading in PCE could further fuel the markets, providing some confirmation/clarification of the CPI data from last week.

We will also be paying attention to final GDP data, unemployment claims, and University of Michigan Consumer sentiment this week.

Has investor appetite gotten ahead of itself in the short term in anticipation of rate cuts? Let’s see how the final two weeks go and if Santa Claus can find his way to the markets with his rally.

We hope you have a wonderful Christmas, and we are thankful for you!

Sincerely,

The Trademark Capital® Team

This material is intended for informational purposes only and should not be construed as legal, accounting, tax, investment, or other professional advice. Trademark Capital’s investment strategies are built using quantitative, proprietary algorithms that are designed to identify and react to changing market conditions. However, investors should be aware that no investment strategy or risk management technique can guarantee returns or eliminate risk in any given market environment. As with all investments, Trademark Capital Management’s investment strategies are subject to risk and may lose money. The investment strategies presented are not appropriate for every investor and individual clients should review with their financial advisors the terms and conditions and risk involved with specific products or services. Due to our active risk management, our managed portfolios may underperform during bull markets. Past performance is no guarantee of future results.