Fed Speak Rattles Markets - 12/23/24

In this holiday edition of Paramount Wealth Perspectives, host Chris Coyle and Chief Investment Officer Scott Tremlett explore the latest market developments and economic trends. From the S&P 500's second consecutive weekly decline and a historic spike in volatility to the Federal Reserve’s cautious outlook for 2025, this episode delves into how shifting data and policy signals are impacting market expectations.

Scott breaks down the implications of stronger-than-expected retail sales, inflation trends, and consumer sentiment, emphasizing the delicate balance between economic resilience and the Fed’s rate decisions. With a mixed outlook for next year, the team discusses the bull case driven by optimism and innovation and the bear case underscored by stretched valuations and geopolitical risks.

They also highlight this week’s light economic calendar and share heartfelt holiday wishes with listeners. Don’t miss this insightful episode to stay informed and ahead of the curve. Happy holidays from all of us at Paramount Wealth Perspectives!

Transcript

Chris Coyle: 0:00

Intro song game on. Hello, everyone. Welcome to paramount wealth perspectives. Your go-to podcast for the latest updates on global markets and current economic events. This is your host, Chris Coyle. Each week we strive to bring you expert analysis on market trends, economic shifts. And key financial developments from around the world. Whether you're an investor business leader. Or simply curious about the global economy. Our podcast is here to keep you informed and ahead of the curve. Now let's dive into the markets and explore what shaping the world of finance today. Here with us today. We have Scott Tremlett chief investment officer and managing partner at paramount associates, wealth management. Scott. Looking back to last week. What are some major events you would like to highlight?

0:59

Thank you, Chris. Last week, major indices, Val. The S and P 500 fell 2% for its second straight, weekly decline. The S and P did end at streak of 14 days of more declining stocks than gainers on Friday. The Dow Jones, industrial average. I finally closed up last Thursday after 10 straight days of declines. It's the largest daily slide since 1974. What didn't fall the 10-year treasury rate. The yield is now up nearly half a percent in the last two weeks alone. Remember yields going up mean bond prices are going down. Also gaining for the week was the dollar. Which hit its two year high last week. But the big gainer for the week was volatility. The volatility index surge after the fed announcement Wednesday. And fed chair Paul's testimony. Uh, 74% jump in one day. It's second biggest daily increase ever. Wow, Scott, it sounds like the surgeon volatility alongside the rising yields and a strengthening dollar really underscores how sensitive markets are to fed actions and Pal's testimony last week. How about the economic reports from last week, Scott? Economic reports were generally positive last week, Chris. November retail sales beat. Up over 6% year over year. It's highest growth rate since 2021. Headline and core PCE inflation numbers. Each came in softer than consensus. Initial jobless claims were lower than expected. And the university of Michigan's consumer sentiment report came in at its highest mark since April. Third quarter us GDP was revised up. An existing home sales were better than anticipated. I hear you, Scott, while the positive economic data is encouraging. It's a classic case of good news being bad news. As stronger growth could complicate the Fed's path toward easing rates. So overall, what are you taking away from last week? Yes, Chris. Good economic news can be bad news for markets in periods of monetary policy change. The markets want rates to come down. They are somewhat dependent on at this point. But, and this is the biggest news item for last week. Good economic news and inflation, seemingly sticking around. Change the projected pace of federal reserve rate cuts for 2025. Last week the fed did cut the overnight rate. Another quarter point. But markets and volatility moves were directly related to the fed indicating that will only cut rates twice in 2025. That has been my expectation. But I guess the market needed to hear it to believe it. The fed raised future projections for inflation. And stated that they can afford to be more cautious and keep an eye on the extent and timing. Of additional moves. Reading different comments from fed participants. It seems that possible paths are widening even within the fed. Some members, state inflation is coming down as expected. Some do not think that the be the case. Some members state that they are considering potential trade and other policy changes in the us. Some including fed chair Powell. As stated that they have not taken us policies into consideration at all. Sounds like a moving target. Data dependent. We will have to wait and see what all this means for 2025. Thanks for that explanation, Scott, it's clear that the Fed's cautious tone and revise projections for your fewer rate cuts in 2025. Are reshaping market expectations. Underscoring just how sensitive markets are to both economic data and policy signals. So, what are you thinking for next year? Chris, we did touch on expectations for 2025 last week. And I'm certain, we will come back to this topic again. But. At week's end, the big picture market outlook. Is really mixed the bull case points to fed easing disinflation, a strong us consumer strong labor market optimism for us policies and AI excitement. The bear case considers a more hawkish fed. Stretch valuations. And geopolitical concerns. That's understandable with such a mixed outlook. It's fascinating to see the bull case driven by optimism and innovation while the bear case keeps a cautious focus on valuations. And global uncertainties. Finally, what are you looking at this week? Scott? Due to the holiday. Economic data is light this week, Chris. Tomorrow market's closed early and Wednesday markets in the U S are closed. Today we saw the conference. Board's consumer confidence number disappoint. Well below projections as optimism was replaced by pessimism about future business conditions and incomes. Durable good orders came in today, much weaker than expected. With transportation leading to decline. We have weekly Java's claims on Thursday and overseas. We have various releases from Japan, China, and South Korea this week. I didn't mention earlier. But both the UK and Japan held rates last week, no moves up or down. I want to leave our listeners with a heartfelt, happy holidays. I hope you and your loved ones take advantage of this time together and appreciate the moments the holidays bring us. Well, maybe not the shopping or wrapping gifts. I know all of us here at paramount. Appreciate all of you. Well, we will certainly keep on the lookout for those reports and trends. And I'm sure we will have plenty to discuss next Monday. For now stay informed, stay ahead and join us next week. For more key updates shaping the global economy. Thank you for tuning into paramount wealth perspectives. We hope you all have a fantastic week. And a great holiday season.