“Sometimes nothin’ can be a real cool hand.”
– Lucas “Luke” Jackson, Cool Hand Luke
Very Good News?
Following the federal open market committee (FOMC) meeting on December 12 and 13, 2023, the Federal Reserve announced it would be holding the federal funds rate within a range of 5.25 to 5.5 percent. The Fed, by way of its dot plot, also signaled there would be three 25-basis point rate cuts in 2024.
The Fed believes it has conquered the rampant consumer price inflation of its making. Fed Chair Jerome Powell even took the opportunity at a news conference to toot his own horn:
“Inflation has eased from its highs, and this has come without a significant increase in unemployment. That’s very good news.”
Wall Street celebrated the prospect of future rate cuts by boosting the S&P 500 by 3.6 percent over the following week.
Interest rate cuts are commonly recognized as being bullish for stocks and stimulative for the economy. The rationale is that the burst of cheaper credit produces a borrowing and spending binge that drives stock market speculation and gross domestic product (GDP) growth. Continue reading