Economy
As we wait for the government to complete its reboot and start dishing out economic data again, the mood continue to drift in favor of another rate cut on December 10. Over the last several days, a few of the voting members at the Fed had come out publicly suggesting we have room for rates to move lower in the short-term, and Wall Street has responded by mostly pricing this in to the bond market. Today, the CME Group's FedWatch tool is showing an 86% probability of a cut, up from 30% a few weeks ago. We'll probably be reading and hearing a lot about the health of the consumer coming off what has historically been the busiest retail shopping day of the year, but with Black Friday leaking earlier into the calendar every year, the unofficial holiday isn't what it once was. Speaking of Black Friday, a shout out to my father who walked 18 miles in a mall yesterday...
The US worker seems to be doing okay if the labor market is any indicator. While the monthly jobs report will be pushed back a few weeks, the weekly reports detailing initial claims for unemployment insurance seem to suggest that companies are not ramping up layoffs. Weekly jobless claims hit a seven month low this week, as this labor market is in a "slow to hire, slow to fire" situation. Further evidence of this is seen in the amount of people who remain on unemployment insurance, which hit 1.96 million people, up from 1.92 million on Labor Day.
Markets
Whether it was Fedspeak or Thanksgiving vibes that drove stocks higher, the market gained back nearly all of the recent losses in a holiday-shortened week. The S&P 500 rose 3.73% to close less than 1% away from an all-time high. As bad as sentiment was just a couple of weeks ago, the mood in the room has seemingly completely changed. Driving the market higher was a combination of both increased hopes for a rate cut in two weeks and a renewed faith in the AI trade. We're closing the book on a volatile November and heading in to the seasonably best month for stocks coming off a strong Q3 earnings season. To close out the year, the Fed's December 10 meeting could be the most exciting singular event in the markets, followed by the November jobs and inflation reports (barring any unforeseen geopolitical events).
What We're Reading
- The Four Year Rule for Retiement Spending- Ben Carlson
- How Trump Administration Aimed Tariff Exemptions at Rising Food Costs - WSJ
Have a great weekend.
Dogwood Wealth Management