Markets
Investors are hoping for a Santa Claus rally which is really part of “seasonality”.
Yet his year, seasonality has not worked out thus far. September and October are considered the two worse months on the calendar. Though, the markets came out ‘unscathed’. The strong seasonality of November and December has not materialized…
Santa, where are you?
Stocks ended last week mixed. A widely anticipated Federal Reserve decision on interest rates and a rotation into non-tech areas helped push the Dow Industrials higher, while the broader market and technology stocks lagged behind.
The Standard & Poor’s 500 Index declined 0.63 percent, while the Nasdaq Composite Index fell 1.62 percent. Meanwhile, the Dow Jones Industrial Average advanced 1.05 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, rose 0.89 percent.1,2
Market Rotation After Fed Decision, Growth to Value
Stocks stayed in a fairly tight trading range over the first half of the week. Tech remained a strong spot on Monday despite slight to modest declines in all three major averages.3
By Tuesday’s close, all three major averages were slightly to modestly lower week-to-date as the Fed’s last interest-rate-setting meeting of the year approached.4
Then, on Wednesday morning, stocks rose ahead of the Fed’s announcement that it was lowering rates by a quarter percentage point—a widely expected move. By the close, all three major averages ended in the green.5,6
A market rotation theme dominated the rest of the week, as investors shifted into cyclical areas of the economy that are likely to benefit from an economic rebound. The Nasdaq ended Thursday’s session lower, while the S&P and Dow Industrials hit fresh record closes. The Russell 2000 Index of small-cap stocks also notched new closing highs.7
The rotation into value stocks continued on Friday, with some AI names coming under pressure. The financial, healthcare, and industrial sectors were among the groups that seemed to benefit from the rotation.8
No Surprise, Just Tea Leaves
Last week’s rate decision from the Federal Reserve was no big surprise. Speculators had already priced in this outcome weeks ago.
Now for reading the tea leaves: First, Fed Chair Powell stated in his press conference on Wednesday that they have ruled out a rate hike for the foreseeable future, but also noted that it would be a higher bar for further rate reductions. Another point was the degree of dissent: the vote was 9-3.9
Then on Friday, voting members who dissented expressed views on inflation and jobs, and which risk was the more important one to address through monetary policy.
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